Since Wikipedia’s launch in 2001, its reputation has been improving.
But can the online encyclopedia predict market moves?
Possibly. Researchers led by Dr. Suzy Moat, senior research fellow at Warwick Business School discovered Wikipedia’s page views on financial topics rose immediately prior to stock market falls.
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This makes sense, says Moat, because “If investors spend more time and effort gathering information before making big decisions, then we might expect to see people looking for more financial information before stocks are sold at lower prices.”
The researchers monitored how often people viewed a set of 285 Wiki pages relating to general financial topics, such as macroeconomics, capital and wealth.
Then, they formulated a trading strategy based on those views, which would have generated up to 297% profit. The control strategy in this scenario, a buy-and-hold, would’ve only generated 3%.
Curiously, there was no such profit margin when measuring the number of times these same general finance pages were edited.
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Whether or not this data can warn us of an incoming downturn, it’s worrying that people looking up financial Wikipedia articles are the same people making decisions that impact global markets.
“Our latest results provide further evidence that data on online information gathering may contain precursors of collective decisions taken in the real world,” said Dr Preis, Associate Professor of Behavioural Science at Warwick.