Outperforming the Benchmark: Identifying Investment Strategies for the US REIT Market using Google Trends

An increasing amount of research has been devoted to internet search query data and its application to predict a broad variety of indicators such as stock/property markets, unemployment or flu infections.This paper aims to investigate whether changes in internet queries can be used to formulate a trading strategy for the US REIT market. Therefore we collect search volume data from Google Trends for a set of over 200 real estate and investment related key words. We construct an investment strategy based on changes in internet search queries to anticipate REIT market movements.The results show that Google has the ability to serve as profound investor-sentiment indicator. Moreover we show that investment strategies based on changes in Google data would have significantly outperformed a buy-and-hold scenario for the FTSE NAREIT US Real Estate Index between January 2004 and October 2013. Further, we find that real estate related terms qualify more than general investment search queries for predicting REIT market movements.Whilst the analysis proposed is focused on the real estate market (REITs), we believe that the approach can also be applied to other tradable asset classes. The research highlights the capabilities of internet search query data with respect to investment strategies. The article represents the first analysis of REIT trading strategies based on internet search queries.