Search engine study shows limits of alternative data

Google Trends adds nothing to volatility predictions, researchers find

data-search

A promising source of alternative data for forecasting volatility adds little over conventional predictions, forthcoming research shows – another example of how tough finding value in novel datasets can be.

Internet search data, collected by Google through its Google Trends service, is a good predictor of volatility for equities, equity indexes, funds, bonds, foreign exchange rates and commodities. But implied volatility, derived from option prices, provides almost all the predictive power of

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