New research says that Wikipedia could provide indications of future movements in the stock market. Researchers from Warwick Business School in the U.K. and Boston University in the U.S. found through a historical analysis that how often financially-related articles on Wikipedia were viewed was linked to future movements in the Dow Jones Industrial Average.
The analysis took place between December 2007 and April 2012 and looked at the frequency with which 30 pages that described companies in the Dow Jones Industrial Average, like Procter & Gamble, Bank of America, and The Walt Disney Company, were viewed and edited.
Their findings? Increased views of financial Wikipedia pages were linked to falls in stock market prices.
Therefore, they found that a simple trading strategy based on the views of those 30 pages related to Dow companies would have led to "significant profits" of up to 141 percent.
A similar strategy based on views of 285 Wikipedia pages on general financial topics would have led to mind-blowing profits of up to 297 percent. A buy and hold strategy, the researchers say, would have only brought in three percent profit.
Here's the theory: “We know that humans are more concerned about losing £5 than they are about missing an opportunity to gain £5," said Suzy Moat of Warwick Business School, in a statement. "If investors spend more time and effort gathering information before making what they consider to be a bigger decision, then we might expect to see people looking for more financial information before stocks are sold at lower prices, in line with our results.”
Graph via Nature.com
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