Gold­man Sachs reck­ons Brazil to win World Cup foot­ball

UBS sees vic­tory for Ger­many, ING for Spain

Financial Chronicle - - FRONT PAGE - TICKER NEWS SER­VICE

WITH the 2018 Fifa World Cup all set to be­gin in Rus­sia on Thurs­day, global in­vest­ment banks are pre­dict­ing their favourites through port­fo­lio theory, ma­chine learn­ing and ar­ti­fi­cial in­tel­li­gence.

Gold­man Sachs has pre­dicted Brazil to win its sixth World Cup de­feat­ing Ger­many in the fi­nal on July 15. Gold­man Sachs used ma­chine learn­ing to run 200,000 mod­els, min­ing da- ta on team and in­di­vid­ual player at­tributes, to help fore­cast match scores and then sim­u­late one mil­lion pos­si­ble vari­a­tions to calcu- late the prob­a­bil­ity of each team’s progress in the tour­na­ment and de­ter­mine who would come out on top.

“We are drawn to ma­chine learn­ing mod­els be­cause they can sift through a large num­ber of pos­si­ble ex­plana­tory vari­ables to pro­duce more ac­cu­rate fore­casts than con­ven­tional al­ter­na­tives,” Gold­man Sachs Global In­vest­ment Re­search said in a re­port.

The Gold­man Sachs re­port notes that Brazil qual­i­fied eas­ily for the World Cup and is cur­rently placed sec­ond in the Fifa world rank­ings. Gold­man Sachs’ other pre­dic­tions are:

While France has a bet­ter prob­a­bil­ity of lift­ing the tro­phy, it is ex­pected to meet Brazil in the semi­fi­nal, and the team may not be strong enough to make it past the Sele­cao.

Spain and Ar­gentina are ex­pected to un­der­per­form, los­ing to France and Portu- gal in the quar­ter­fi­nals, re­spec­tively.

De­spite the tra­di­tional boost that comes with host­ing the com­pe­ti­tion, Rus­sia will fail to progress from the group stage.

Gold­man Sachs’ 2014 pre­dic­tion of Brazil win­ning the ti­tle didn’t come through, as Ger­many went on to win the World Cup. The same un­pre­dictabil­ity is there this time too, and that is why the au­thors of the re­port, Manav Chaud­hary, Ni­cholas Fawcett and Sven Jari Stahn, of­fer a dis­claimer. “It is dif­fi­cult to as- sess how much faith one should have in these pre­dic­tions. But the fore­casts re­main highly un­cer­tain, even with the fan­ci­est sta­tis­ti­cal tech­niques, sim­ply be­cause foot­ball is quite an un­pre­dictable game. This is, of course, pre­cisely why the World Cup will be so ex­cit­ing to watch,” the re­port said.

The in­vest­ment bank also turned to Carlo Ancelotti, for­mer Italy in­ter­na­tional and leg­endary coach, for his tips and rec­om­men­da­tions. It also con­sulted the bank’s economists from across the world for an ac­cu­rate fore­cast. In a light-hearted com­men­tary on World Cup trends viewed through eco­nomic lens, the Gold­man Sachs re­port said the teams have be­come more riska­verse in the fi­nals over time. The num­ber of goals scored in a match used to be 4-5 dur­ing the 1970s and the 1980s, but has de­clined to 1-2 over the past decade. “Will the re­cent uptick in global rates and the nar­ra­tive of a bond bear mar­ket mean we will see more goals in the 2018 fi­nals?”

“Con­duct­ing mon­e­tary pol­icy and kick­ing a penalty are clearly dif­fer­ent en­deav­ours, yet both re­quire cold blood and hard train­ing. In­deed, we find a strong cor­re­la­tion be­tween the ‘suc­cess rate’ of penalty shoot­ers and cen­tral bankers across coun­tries. Achiev­ing an in­fla­tion tar­get and scor­ing a World Cup penalty both seem to be largely a mat­ter of ac­cu­racy,” the re­port con­cluded.

Swiss bank UBS pre­dicted a win for Ger­many, fol­lowed closely by Brazil and Spain on ob­jec­tive skill-level man­age­ment called Elo rat- ing. Ja­panese bank No­mura sees France and Spain in fi­nal based on port­fo­lio theory and ef­fi­cient mar­kets hy­poth­e­sis. Dutch bank ING pre­dicts tri­umph for Spain on an as­sump­tion based on cor­re­la­tion of value and suc­cess.

Also, pre­dic­tions for the World Cup by an­i­mals are also get­ting in­ter­est­ing. A deaf, white cat named Achilles is soon go­ing to pre­dict win­ners of each game in Rus­sia, just like “Paul the Oc­to­pus,” who be­came a star dur­ing the 2010 World Cup in South Africa.

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