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Predicting the Present with Google Trends

Predicting the Present with Google Trends

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Published by Pascal Van Hecke
"Our work to date is summarized in a paper called Predicting the Present with Google Trends. We find that Google Trends data can help improve forecasts of the current level of activity for a number of different economic time series, including automobile sales, home sales, retail sales, and travel behavior."

Source: http://googleresearch.blogspot.com/2009/04/predicting-present-with-google-trends.html
"Our work to date is summarized in a paper called Predicting the Present with Google Trends. We find that Google Trends data can help improve forecasts of the current level of activity for a number of different economic time series, including automobile sales, home sales, retail sales, and travel behavior."

Source: http://googleresearch.blogspot.com/2009/04/predicting-present-with-google-trends.html

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Published by: Pascal Van Hecke on Apr 06, 2009
Copyright:Attribution Non-commercial

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06/14/2009

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Predicting the Present with Google Trends
Hyunyoung ChoiHal Varian
c
Google Inc.Draft Date April 2, 2009 
 
Contents
1 Methodology 1
1.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2 Examples 6
2.1 Retail Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2 Automotive Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.3 Home Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122.4 Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3 Conclusion 184 Appendix 19
4.1 R Code: Automotive sales example used in Section 1 . . . . . . . . . . . . . . . . . . . . 19i
 
Motivation
Can Google queries help predict economic activity?Economists, investors, and journalists avidly follow monthly government data releases on economicconditions. However, these reports are only available with a lag: the data for a given month is generallyreleased about halfway through through the next month, and are typically revised several months later.Google Trends provides
daily and weekly 
reports on the volume of queries related to various industries.We hypothesize that this query data may be correlated with the
current 
level of economic activity ingiven industries and thus may be helpful in predicting the subsequent data releases.We are not claiming that Google Trends data help predict the future. Rather we are claiming thatGoogle Trends may help in
predicting the present.
For example, the volume of queries on a particularbrand of automobile during the second week in June may be helpful in predicting the June sales reportfor that brand, when it is released in July.
i.
Our goals in this report are to familiarize readers with Google Trends data, illustrate some simpleforecasting methods that use this data, and encourage readers to undertake their own analyses. Certainlyit is possible to build more sophisticated forecasting models than those we describe here. However, webelieve that the models we describe can serve as baselines to help analysts get started with their ownmodelling efforts and that can subsequently be refined for specific applications.The target audiences for this primer are readers with some background in econometrics or statistics.Our examples use
R
, a freely available open-source statistics package
ii.
; we provide the
R
source code forthe worked-out example in Section 1.2 in the Appendix.
i.
It may also be true that June queries help to predict July sales, but we leave that question for future research.
ii.
http://CRAN.R-project.org
ii

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