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PREDICTING THE PRESENT CRISIS WITH GOРћGLE TRENDS
Abstract
Economists and investors avidly follow the data from different channels which would give them more information or indications for making their investment decisions more successful. The data is generally released with a lag and gives no good answers for the present. The purpose of the article is to analyze whether using Google Trends as one of the most widely used online search methods, would it have been possible to forecast the beginning of the ongoing financial crisis. In other words: would it have been possible to predict that there is a bubble in the real estate market in the USA since the beginning of 2006. The analysis is based on online data for the period 2004-2010 and is based on the T-Statistics and regression analysis. We had an assumption that at the time when real estate prices were moving up people had suspicions about the possibility of having bubble in the prices. Our assumption found proof and all statistically significant relationships were in line with the theoretical foundations though some aspects of the results may be debatable. Nevertheless, we found that this method may be a good tool for having the indication of peopleВґs moods and views.
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