The nature of uncertainty in anticipating and coping with crises: a semiotic approach

Abstract

The movements in financial markets have been modelled and interpreted through the history by various disciplines. All the economist, the psychologist, the sociologist but also the anthropologist, can provide an interesting vision useful to a better understanding of the financial phenomena. The most actively mathematical models and numerical data have been used. But even though quotations seem objective for investors, they face of overwhelming uncertainty. As the market is above all a social institution with social interaction and despite the fact that financial economics is one of the social sciences where the empirical data is the most numerous, it cannot reduce market to a set of figures. Quotations still remain social constructions and therefore the quotation does not summarize the actors communicative action but is only a reflection of it.

As an example of semiotical approach the purpose of the article is to analyze whether using Google Trends as one of the most widely used online search methods, would it have been possible to forecast the beginning of the ongoing financial crisis. In other words: would it have been possible to predict that there is a bubble in the real estate market in the USA since the beginning of 2006.

The analysis is based on online data for the period 2004-2010 and is based on the T-Statistics and regression analysis. We had an assumption that at the time when real estate prices were moving up people had suspicions about the possibility of having bubble in the prices. Our assumption found proof and all statistically significant relationships were in line with the theoretical foundations though some aspects of the results may be debatable. Nevertheless, we found that this method may be a good tool for having the indication of people´s moods and views.