The Forecasting Power of Internet Search Queries in the Brazilian Financial Market

Abstract

Purpose: To analyze the predictability of Google's search queries in the Brazilian financial market. Originality/gap/relevance/implications: Despite a growing foreign literature using Google's search query data, there is no acknowledgement of work on this area in Brazil. An application to the Brazilian financial market shows new sources of information about market movements and may contribute to researchers and practitioners to understand how changes in specific search queries affect the market. Key methodological aspects: Following previous studies, we estimate VAR models and Granger causality tests to investigate the effects over three variables in both stock and fixed income markets: traded volume, return and volatility. Following this procedure, we verify both the hypothesis of financial variables being affected by search queries, as well as the opposite relationship. Weekly data from Google's search queries and financial markets was gathered for the period between 2007 and 2014. Summary of key results: The existence of a predictive effect between search query data and financial variables, particularly in the stock market, is evident. However, this result was not robust in all cases studied. It is noteworthy that, for the inverse relationship, i.e. financial market impacting search queries on Google, strong evidence of a causal relationship has been found. A trading strategy based on this type of data yielded higher returns than the defined benchmarks. Key considerations/conclusions: A significant relationship between Google's search query data and the financial market has been discovered. Results provide a new source of information that affects the Brazilian financial market.

Accrualls and systematic risk in Brazilian companies

“…It can be seen that, in order for resources from capital to be effectively invested in productive activities, not only investors but also investment recipients disclose and require information about these same investments (Ramos, Ribeiro, & Perlin, 2017). In financial decisions, information is a preponderant input and plays an indispensable role, constituting a crucial component of all financial transactions and markets (Liberti & Petersen, 2017;Souza, Flach, Borba & Broietti, 2019).…”

Accrualls e risco sistemático nas empresas brasileiras

“…Percebe-se que, para que os recursos oriundos de capital sejam aplicados em atividades produtivas de forma eficaz, não só os investidores como os receptores de investimento, divulgam e requerem informações sobre esses mesmos investimentos (Ramos, Ribeiro, & Perlin, 2017). Nas decisões financeiras, a informação é um insumo preponderante e assume papel indispensável, constituindo-se num componente crucial de todas as transações e mercados financeiros (Liberti & Petersen, 2017;Souza, Flach, Borba & Broietti, 2019).…”

Exploratory Study on the behavior of the Brazilian Financial Market using Google Trends

“…Given this scenario, the present study seeks to understand whether it is possible to use the search data, generated on the web, as a source of information to predict the behavior of the Brazilian financial market. Following the recent literature ( [31]; [7]; [33]), it can be said that this type of data can be used for the financial market in the United States, however, what we propose here is to explore these same properties in a smaller market, in this case, Brazil; which remains underdeveloped and is more dependent on foreign capital. the paper.…”

“…The volumes traded in isolation were analyzed, the direction (ascending or descending) that the market presented during that determined period was disregarded. This evaluation aimed to verify if there is any type of correlation between the volume of searches and the volume of negotiations that occur for a financial instrument -which aims to be a reference for investors - [7] and, for individual companies [33].…”