Monday, August 15, 2011

Tracking Fear

As you may have noticed, I like Google Trends.  What's not to like?  It's a cheap and easy way to find out what people are interested in!  With the recent recession and fears of a double dip, I thought it might be a good way to track interest or fear of recessions.  Directly below is a chart from the somewhere in 2003 to the present for global searches of the word "recession."

As you might predict it jumps almost out of nowhere in what was still the peak of business cycle in 2007.  Then about a year later it jumps again in the winter of 2008 to its highest level.  This is before Bear Stearns collapsed, but right about when the stock market began collapsing around the week of January 21st.  The financial panic of 2008 can also be observed in September during the Lehman Brothers, A.I.G., etc crisis and in October when TARP almost didn't pass the U.S. Congress and stock market was pushing considerably lower amid heavy volatility.  Since then it has more or less tapered off until a jump in the past couple weeks.  Also note that the chart is divided in half by the initial stock collapse.  Before that, the chart is at very low levels, and after that it is always higher.  The searches to news correlate well (which is typical) but the initial January 2008 searches clearly overwhelm the news items.  This shows that the public was proportionately much more interested in news about a recession than the media was able to report.  Because recessions are an example of negative news and involve elements of expectations, this can be considered a way of tracking Google users' fears of a recession.  To the extent that Google is used, this can be considered a measure of the general public's fear as well.

Another feature of Google Trends is that you can break it up by country.  So I thought it might be interesting to see how the word "debt" tracks in countries with ongoing sovereign debt problems.


Greece, shows (at first glance) that the Greeks only started looking for debt in 2011, which would be suprising because they had an earlier bailout in 2010.  Upon closer inspection, the chart shows that the Greeks were spiked their searches off the chart in the past couple months, and that is likely why early amounts do not show very well.  This is due to the way that Google trends displays its data.  It scales the data based on the average of the time period selected, so in the Greek chart the only part displayed is such an outlier that it blows out almost the entire chart.







In most of the other European countries, the charts show a defined peak around the times of the first Greek bailout in May 2010, and the most recent Greek bailout and other recent uncertainties.  Portugal has a slightly different schedule and peaks around the Fall of 2010.  I'm not certain as to why, there isn't a corresponding news jump.  Both Spain and Italy are peaking right now, which makes sense because Italy just introduced another round of austerity measures and both their news cycles are showing jumps as well.  Germany is a bit of an odd ball in this group in that they seem to have a low level of interest in debt, with some pronounced peaks during this crisis, but low levels at all times.  France shows recent volatility, that would coincide with recent rumors of a debt downgrade.  The United States also shows low levels that spike with their recent debt downgrades.

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