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Online reading behavior predicts stock movements

Real-time data could be used to monitor markets and warn of financial crises

2:00pm, January 25, 2016
stock market chart

RISE AND FALL  Stock prices move chaotically and defy easy prediction. But accurate prediction is possible, new research shows, by using information on the web-browsing activities of millions of people. 

Web surfing patterns as people read financial news can be used to make accurate predictions of stock movements from a few minutes to up to a couple of hours in advance, a new study suggests. With further development, the technique may be useful to financial authorities as they monitor markets and seek to fend off emerging crises.

A team of physicists led by Gabriele Ranco of the IMT Institute for Advanced Studies in Lucca, Italy, suspected that better stock predictions might be made by looking at more than the positive or negative sentiment expressed in an article about a particular company. Another key indicator might be how many people actually click on links to those articles, a sign of the social influence of the article and how much its readers are paying attention.

The team used data collected over a yearlong period in 2012 and 2013 from Yahoo! Finance, an online portal for financial news and data. Looking at the 100 U.S. companies with the most frequent mentions

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