Ex-Goldman Banker Bets Big on "Nuclear" and "Earthquake"

by Derek Loosvelt | April 21, 2011

Hedge fund investors use all sorts of variables and research (sometimes of the materlal inside 411 sort) upon which to base their investments, but I don't think any investor has ever used SEO "keywords" as a major variable until now.

japanese blogHideki Furusho, a former banker at Goldman Sachs, and Yutaka Matsuo, a professor at the University of Tokyo, recently started a hedge fund that mainly bases its investment decisions on keywords appearing in some 20 million Japanese blogs.

Matsuo built an alogrithm model to track certain keywords such as "nuclear," "earthquake," "Tokyo Electric" and "compensation," and, using the model, since August 2010, the hedge fund has returned 7.5 percent -- about 400 percent better than the 1.9 percent that Japan's Nikkei 225 Stock Average (a benchmark like the Dow or the S&P 500) returned during the same period.

And if that doesn't convince you of the model's prowess, before the two men opened their Pluga AI Fund for business, they tested Matsuo's model from November 2006 through July 2010, making simulated trades, and the pseudo fund returned 46.8 percent.

(Bloomberg: Ex-Goldman Sachs Banker Starts Hedge Fund Analyzing Japanese Blog Traffic)

Filed Under: Finance


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