title: Can Google Trends search queries contribute to risk diversification?
abstract: Portfolio diversification and active risk management are essential parts of financial analysis which became even more crucial (and questioned) during and after the years of the Global Financial Crisis. We propose a novel approach to portfolio diversification using the information of searched items on Google Trends. The diversification is based on an idea that popularity of a stock measured by search queries is correlated with the stock riskiness. We penalize the popular stocks by assigning them lower portfolio weights and we bring forward the less popular, or peripheral, stocks to decrease the total riskiness of the portfolio. Our results indicate that such strategy dominates both the benchmark index and the uniformly weighted portfolio both in-sample and out-of-sample.
authors.affiliation: 1] Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Opletalova 26, 110 00, Prague, Czech Republic, EU [2] Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic, Pod Vodarenskou Vezi 4, 182 08, Prague, Czech Republic, EU.
authors.forename: Ladislav
authors.initials: L
authors.lastname: Kristoufek
references.citation: Proc Natl Acad Sci U S A. 2011 May 10;108(19):7674-8
references.pmid: 21521789
references.citation: PLoS One. 2012;7(7):e40014
references.pmid: 22829871
references.citation: Nature. 2011 Jan 20;469(7330):351-5
references.pmid: 21248842
references.citation: Science. 2009 Jul 24;325(5939):425-8
references.pmid: 19628859
references.citation: Nature. 2003 May 15;423(6937):267-70
references.pmid: 12748636
references.citation: Science. 2011 Feb 11;331(6018):719-21
references.pmid: 21311013
references.citation: Nature. 2011 Mar 10;471(7337):166
references.pmid: 21390114
references.citation: Philos Trans A Math Phys Eng Sci. 2010 Dec 28;368(1933):5707-19
references.pmid: 21078644
references.citation: Sci Rep. 2012;2:350
references.pmid: 22482034
references.citation: Proc Natl Acad Sci U S A. 2010 Oct 12;107(41):17486-90
references.pmid: 20876140
references.citation: Science. 2009 Jul 24;325(5939):422-5
references.pmid: 19628858
references.citation: Sci Rep. 2013;3:1665
references.pmid: 23588852
references.citation: Sci Rep. 2012;2:752
references.pmid: 23082242
references.citation: PLoS One. 2012;7(2):e31144
references.pmid: 22347444
references.citation: Nature. 2010 Apr 15;464(7291):1025-8
references.pmid: 20393559
references.citation: Science. 2012 Oct 26;338(6106):472-3
references.pmid: 23112315
references.citation: Phys Rev E Stat Nonlin Soft Matter Phys. 2010 Sep;82(3 Pt 2):036114
references.pmid: 21230146
references.citation: Sci Rep. 2013;3:1684
references.pmid: 23619126
references.citation: Nature. 2002 Jan 17;415(6869):269-72
references.pmid: 11796988
references.citation: Science. 2011 Sep 30;333(6051):1814-5
references.pmid: 21960603
references.citation: Science. 2009 Feb 6;323(5915):721-3
references.pmid: 19197046
references.citation: Nature. 2003 Jan 9;421(6919):129-30
references.pmid: 12520292