6 ms·

Google Has Own $26.5bil Trading Floor, Predicts Market With Search Data?

50 points by cl3m 16y ago

tewks 16y ago
There is a story told, I think in Ken Auletta's book, by Eric Schmidt from the earlier days of the company where Sergey proposes starting a hedge fund because they have so much better data than anyone else. Schmidt cautions against the notion due to perhaps significant legal implications. Something that would perhaps counter this are complaints on zerohedge and elsewhere that Goldman's privacy policy on some of its data services leave open the possibility for them to use usage data for prop trading. There must be people within Google wondering that if others are getting away with this, why can't they? There must also be people worried about the company's dependence on a single source of revenue...
brown9-2 16y ago
The latter part of this headline is nothing but speculation in the article.
marcofloriano 16y ago
A very good try from Google, imo. But it´s don´t mean they will be succefull just because they think they can predict the market. Indeed, predicting the market is the wrong way to get profit, Actually it´s the way to get lost your money. Investing and trading is much more about managining emotions and felling at the long term then trying to use tons of data to forecast the next big trend.
meric 16y ago
Hmm I remember reading somewhere before about Google Venture's acquisition of (or rather, investment in) a startup company who was working on a product that could predict future events. Maybe with this Google can predict markets as well. link: http://www.nydailynews.com/money/2010/05/04/2010-05-04_google_invests_in_company_that_tries_to_predict_the_future.html http://www.nydailynews.com/money/2010/05/04/2010-05-04_googl...
rs 16y ago
Aren't they kicking off the trading floor to manage their cash, rather than to becoming a hedge fund/investment bank ? I remember reading an article in the recent past where they have hired some ex-IB traders (Goldmans, Lehmans, etc) to run their Treasury department. The new hires were due to the fact that they were changing their risk profile of their portfolio. I read they were looking for some bond traders as they're planning on moving towards corporation bonds rather than treasuries/govvies. I need to look for that article.
- haasted 16y ago
  http://news.ycombinator.com/item?id=1385741 http://news.ycombinator.com/item?id=1385741 http://www.businessweek.com/magazine/content/10_23/b4181033582670.htm http://www.businessweek.com/magazine/content/10_23/b41810335...
known 16y ago
Is Google following RedHat? http://saviorodrigues.wordpress.com/2009/03/09/is-red-hat-a-software-firm-or-financial-institution/ http://saviorodrigues.wordpress.com/2009/03/09/is-red-hat-a-...
dreeves 16y ago
As to the question of whether Google could exploit their search data to predict the stock market: http://messymatters.com/searchpred http://messymatters.com/searchpred (summary: not really)
- wdewind 16y ago
  Slightly less short summary: In some things search can add a slight benefit to predictive analysis (from the current baseline strategy), in others it doesn't really help at all and even in the cases it does it's only marginally useful, "we find search volume on its own is predictive of future outcomes, but search is nevertheless outperformed by baseline models trained on publicly available data; combining search and baseline models generally leads to modest improvements."
ThomPete 16y ago
After reading "The Black Swan" by Taleb and finally understanding some of the issues with predictability. These kind of claims just sound like astrology to me. brown9-2-2 is right the latter part of the headline is pure speculation.
- hegemonicon 16y ago
  Careful. "The Black Swan" is a pop non-fiction book, and reading it won't give you an intimate understanding of markets. Taleb has taken his share of criticism (http://www.efalken.com/papers/Taleb2.html http://www.efalken.com/papers/Taleb2.html) and his ability to capitalize on the deep insights he'd like you to believe he has is somewhat questionable (http://www.businessinsider.com/did-nassim-talebs-universa-get-killed-on-thursdays-big-bet-2010-5 http://www.businessinsider.com/did-nassim-talebs-universa-ge...)
  - ThomPete 16y ago
    Let me put it like this. If the market where predictable we would live in a very different world. So the proof is in the pudding. No one predicts markets unless they somehow control them.
joe-mccann 16y ago
Could Google be using their search data for... equals easiest way to drive traffic to your site. Quite frankly, data that is scraped and analyzed by the algos and quant funds is probably much more relevant, but it does not mean Google could not define a strategy based on search data; however, it is pure speculation and link bait to just throw the assertion out there willy nilly.
- wdewind 16y ago
  Agree 100%, without actually showing how search data would be used it's kind of pointless. At first though it seems OBVIOUS that they'd be using search data, but when you actually think about it, what would the application be? Would the market effects in search show up fast enough to be relevant to the market? And for HFT it's useless. Would be more that interested in being proven wrong.
starkfist 16y ago
The search data is probably less useful than all the other data they have regarding how much money individuals and corporations will pay for various words. Or all the private email they process for "other purposes relating to offering you Gmail".
aresant 16y ago
In terms of them predicting markets with search data lots of commentators are saying no way, but I strongly disagree. Google can predict flu-like illnesses within 92% accuracy of CDC data which is dervied from labratory testing. Furthermore trading stocks seems to me to be a behavior that would be easy to predict through Google's "intent-based" algorithms used for serving advertising. EG - For instance knowing how many searches there are a day for "is AAPL overpriced" vs. "is AAPL underpriced" you'd have data that would begin to correlate to market value - with enough data points you could make some pretty darn educated guesses about what a given stock would do. Toss in a hundred PHDs, a few dozen traders from the greediest depths of wallstreet and the question shouldn't be CAN they do it, but WHEN will they do it. Reference: http://pagingdrgupta.blogs.cnn.com/2010/05/18/how-accurate-is-google-flu-trends/ http://pagingdrgupta.blogs.cnn.com/2010/05/18/how-accurate-i...
- chollida1 16y ago
  > For instance knowing how many searches there are a day for "is AAPL overpriced" vs. "is AAPL underpriced" you'd have data that would begin to correlate to market value - with enough data points you could make some pretty darn educated guesses about what a given stock would do. You may be right but the only thing that really moves the market is the large institutional funds. None of these funds are going to do a google search for "Is apple overpriced" and then say OMG we've got to sell apple now.
  - Create 16y ago
    Fact: some non-US companies explicitly forbid their people to search using google, especially patents through google's service.
    - paulgb 16y ago
      Interesting fact, happen to have a source?
      - Create 16y ago
jayruy 16y ago
This is nonsense - I know people in quant funds who have tried to do things like this. All the boring stuff that Google doesn't care about, like SEC filings and Quarterly Reports, matter far more than aggregate attention. I'm sorry but if you're making decisions for a multi-million dollar fund, and you tell investors that your investments are based on the twitterings of the unwashed masses, you'll be sent home before you've had your lunch. Even if there is value in their data (and I do imagine enough PhD's could find some reasonable strategies) - there would be such a public outcry that it wouldn't be worth it from a PR perspective.

50 points by cl3m 16y ago

tewks 16y ago

There is a story told, I think in Ken Auletta's book, by Eric Schmidt from the earlier days of the company where Sergey proposes starting a hedge fund because they have so much better data than anyone else. Schmidt cautions against the notion due to perhaps significant legal implications. Something that would perhaps counter this are complaints on zerohedge and elsewhere that Goldman's privacy policy on some of its data services leave open the possibility for them to use usage data for prop trading. There must be people within Google wondering that if others are getting away with this, why can't they? There must also be people worried about the company's dependence on a single source of revenue...

brown9-2 16y ago

The latter part of this headline is nothing but speculation in the article.

marcofloriano 16y ago

A very good try from Google, imo. But it´s don´t mean they will be succefull just because they think they can predict the market. Indeed, predicting the market is the wrong way to get profit, Actually it´s the way to get lost your money. Investing and trading is much more about managining emotions and felling at the long term then trying to use tons of data to forecast the next big trend.

meric 16y ago

Hmm I remember reading somewhere before about Google Venture's acquisition of (or rather, investment in) a startup company who was working on a product that could predict future events. Maybe with this Google can predict markets as well. link: http://www.nydailynews.com/money/2010/05/04/2010-05-04_google_invests_in_company_that_tries_to_predict_the_future.html http://www.nydailynews.com/money/2010/05/04/2010-05-04_googl...

rs 16y ago

Aren't they kicking off the trading floor to manage their cash, rather than to becoming a hedge fund/investment bank ? I remember reading an article in the recent past where they have hired some ex-IB traders (Goldmans, Lehmans, etc) to run their Treasury department. The new hires were due to the fact that they were changing their risk profile of their portfolio. I read they were looking for some bond traders as they're planning on moving towards corporation bonds rather than treasuries/govvies. I need to look for that article.

haasted 16y ago
http://news.ycombinator.com/item?id=1385741 http://news.ycombinator.com/item?id=1385741 http://www.businessweek.com/magazine/content/10_23/b4181033582670.htm http://www.businessweek.com/magazine/content/10_23/b41810335...

known 16y ago

Is Google following RedHat? http://saviorodrigues.wordpress.com/2009/03/09/is-red-hat-a-software-firm-or-financial-institution/ http://saviorodrigues.wordpress.com/2009/03/09/is-red-hat-a-...

dreeves 16y ago

As to the question of whether Google could exploit their search data to predict the stock market: http://messymatters.com/searchpred http://messymatters.com/searchpred (summary: not really)

wdewind 16y ago
Slightly less short summary: In some things search can add a slight benefit to predictive analysis (from the current baseline strategy), in others it doesn't really help at all and even in the cases it does it's only marginally useful, "we find search volume on its own is predictive of future outcomes, but search is nevertheless outperformed by baseline models trained on publicly available data; combining search and baseline models generally leads to modest improvements."

ThomPete 16y ago

After reading "The Black Swan" by Taleb and finally understanding some of the issues with predictability. These kind of claims just sound like astrology to me. brown9-2-2 is right the latter part of the headline is pure speculation.

hegemonicon 16y ago
Careful. "The Black Swan" is a pop non-fiction book, and reading it won't give you an intimate understanding of markets. Taleb has taken his share of criticism (http://www.efalken.com/papers/Taleb2.html http://www.efalken.com/papers/Taleb2.html) and his ability to capitalize on the deep insights he'd like you to believe he has is somewhat questionable (http://www.businessinsider.com/did-nassim-talebs-universa-get-killed-on-thursdays-big-bet-2010-5 http://www.businessinsider.com/did-nassim-talebs-universa-ge...)
- ThomPete 16y ago
  Let me put it like this. If the market where predictable we would live in a very different world. So the proof is in the pudding. No one predicts markets unless they somehow control them.

joe-mccann 16y ago

Could Google be using their search data for... equals easiest way to drive traffic to your site. Quite frankly, data that is scraped and analyzed by the algos and quant funds is probably much more relevant, but it does not mean Google could not define a strategy based on search data; however, it is pure speculation and link bait to just throw the assertion out there willy nilly.

wdewind 16y ago
Agree 100%, without actually showing how search data would be used it's kind of pointless. At first though it seems OBVIOUS that they'd be using search data, but when you actually think about it, what would the application be? Would the market effects in search show up fast enough to be relevant to the market? And for HFT it's useless. Would be more that interested in being proven wrong.

starkfist 16y ago

The search data is probably less useful than all the other data they have regarding how much money individuals and corporations will pay for various words. Or all the private email they process for "other purposes relating to offering you Gmail".

aresant 16y ago

In terms of them predicting markets with search data lots of commentators are saying no way, but I strongly disagree. Google can predict flu-like illnesses within 92% accuracy of CDC data which is dervied from labratory testing. Furthermore trading stocks seems to me to be a behavior that would be easy to predict through Google's "intent-based" algorithms used for serving advertising. EG - For instance knowing how many searches there are a day for "is AAPL overpriced" vs. "is AAPL underpriced" you'd have data that would begin to correlate to market value - with enough data points you could make some pretty darn educated guesses about what a given stock would do. Toss in a hundred PHDs, a few dozen traders from the greediest depths of wallstreet and the question shouldn't be CAN they do it, but WHEN will they do it. Reference: http://pagingdrgupta.blogs.cnn.com/2010/05/18/how-accurate-is-google-flu-trends/ http://pagingdrgupta.blogs.cnn.com/2010/05/18/how-accurate-i...

chollida1 16y ago
> For instance knowing how many searches there are a day for "is AAPL overpriced" vs. "is AAPL underpriced" you'd have data that would begin to correlate to market value - with enough data points you could make some pretty darn educated guesses about what a given stock would do. You may be right but the only thing that really moves the market is the large institutional funds. None of these funds are going to do a google search for "Is apple overpriced" and then say OMG we've got to sell apple now.
- Create 16y ago
  Fact: some non-US companies explicitly forbid their people to search using google, especially patents through google's service.
  - paulgb 16y ago
    Interesting fact, happen to have a source?
    - Create 16y ago

jayruy 16y ago

This is nonsense - I know people in quant funds who have tried to do things like this. All the boring stuff that Google doesn't care about, like SEC filings and Quarterly Reports, matter far more than aggregate attention. I'm sorry but if you're making decisions for a multi-million dollar fund, and you tell investors that your investments are based on the twitterings of the unwashed masses, you'll be sent home before you've had your lunch. Even if there is value in their data (and I do imagine enough PhD's could find some reasonable strategies) - there would be such a public outcry that it wouldn't be worth it from a PR perspective.