The Hidden Meaning of Grand Theft Auto
What does Grand Theft Auto V have to do with the stock market?
We have no idea. But Google does. According to its Trends analytics tool, the three-year-old video game was a breakout topic globally among those searching for the term "stock market" as of 10 a.m. Hong Kong time Friday.
With no discernible news on the topic -- we couldn't find any press releases or major breaking items over the past day -- those with access to even deeper data and the nous to crunch the numbers may be able to profit from knowing that the controversial shoot-and-scoot game was suddenly hot.
Mitsubishi UFJ Morgan Stanley Securities is one company that's using such information troves to provide longer-term analysis of companies and their industries, Kunihiko Shiohara, general manager of equity research, told Bloomberg News. Other banks are looking at similar endeavors.
The broker's move follows a crackdown that is limiting analyst access to company managers right before earnings announcements in Japan, as well as new rules in Europe aimed at decoupling research and brokerage fees.
Sounds like a solid solution: Since they can't profit from relationships and information, they'll try to profit from data (which is also information). The problem is there's great potential for companies like Google and Facebook, which already make a living from data-crunching, to compete with financial institutions doing just that, and they're likely to do a better job.
The big dogs of big data have so far only flirted with finance. Four years ago, for example, Google commissioned a study on how to enter asset management, stoking fear among funds. Facebook has been dabbling with the idea of becoming a bank, but so far has stuck to payment systems and money transfers in its virtual realm.
These giants know their power. Back in 2009, Google's chief economist, Hal Varian, published a series of blog posts showing how search trends could help forecast key economic data such as auto sales or initial jobless claims. Imagine what they could do if they started crunching their endless data to predict stock movements.
Moreover, after a decade of cutting headcount, banks are showing poorer results forecasting equity moves.
In some ways the competition is already there. Small firms that specialize in scraping the web and crunching tweets and searches to come up with investment advice are plentiful, and most of them claim better returns than the average fund offered at a bank.
Searching Google Trends with the keyword "finance" showed a spike in interest in Kia Motors after the company announced a factory in Mexico. Investors might benefit from tracking such subjects, but the results wouldn't necessarily be profitable because the reason for the interest was clear and public.
The correlation between "stock market" and "Grand Theft Auto V" isn't obvious, 1 and any case of information asymmetry is an opportunity to find an edge in financial markets, which is what insider traders have been doing for decades.
A good analyst may still be able to figure out whether the increased interest is positive or negative and model accordingly. But with forecasters thinned out by the industry's atrophy, there's an increasing chance that companies that are better at data crunching will beat financial institutions at their own game.
They may even be able to work out the connection between Grand Theft Auto V and the stock market.
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Paul Sillitoe at email@example.com