√úberraschung! England to win the World Cup

Deutsche Bank, Goldman Sachs, UBS and PwC have each had a crack at predicting the country they expect to lift the World Cup trophy on July 13.
I'll have a world cup please
I'll have a world cup please

Football is a funny old game but so is football analysis.

“It’s a game of two halves”, “the referee is blind” and “England nil” are just some of the phrases likely to be heard over the next four weeks as the football (sorry American readers) World Cup kicks off in Brazil on Friday.

Deutsche Bank, Goldman Sachs, UBS and PwC have each had a crack at predicting the country they expect to lift the ultimate team trophy (again, sorry American readers) on July 13. And no, Deutsche Bank has not plumped for Germany.

In a move surely designed to flood the England camp with overconfidence, the German bank is backing the Three Lions to win its second World Cup; the first being in 1966, before footballers became athletes.

“The last time England had so many Liverpool players in the team, it won. Therefore we are confident that England will win this World Cup,” Deutsche Bank strategists Bilal Hafeez and Henrik Gullberg said in their report released on Tuesday.

The logic is that Liverpool is the most successful English club team, having won more top flight matches than any club; and they have also won five European Cups.

Therefore it is surely a nailed-on certainty that the current crop of players, which won nothing last season, will carry the England team to glory.

On the other hand, when Liverpool was in its pomp in Europe there was one occasion when England didn't even qualify for the World Cup finals. What's more, only one Liverpool player actually played in the 1966 final -- Roger Hunt -- out of the three that were in the squad.

Of course, Deutsche Bank's research is to be taken very much tongue-in-cheek. The German bank also goes on to “properly” analyze historic and current football data to produce its serious tip for ultimate success.

Boringly, it suggests that, based on FIFA world rankings, adjusted for the strength of a team’s World Cup first-round group, current champions and dull-yet-fantastic Spain should win, with Germany a sort-of close second.

Equally boringly, based on historical performance at previous World Cups, Brazil should win – this year’s host nation has won the World Cup five times.

Meanwhile, based on the number of players in competitive football leagues globally, Spain again should win, Deutsche Bank estimates.

Brazil, predictably

Deutsche Bank, of course, is not alone in sticking its neck out to offer its thoughts on who will win the golden trophy. UBS and PwC last week separately agreed that Brazil will win.

Goldman Sachs, in an exhaustive report presumably chewed over in its elevators all year, discusses the correlation between economics and the people’s sport, coming to the conclusion that Algeria has no chance of winning.

Again, the US-based investment bank plumps for Brazil as its expected champions, beating Argentina 3-1 in the final. England, meanwhile, will disappear from the tournament in the first round without winning a game (they might be on to something there).

In the interests of fairness, the US bank predicts that the US team will also exit at the first-round stage, drawing with Ghana and Portugal but losing to Germany. It also pointed out that in 2010 it predicted Brazil would win that year’s World Cup, held in South Africa, but the trophy was actually won by Spain.

Goldman’s analysis utilizes “a stochastic model that generates a distribution of outcomes for each of the 64 matches … predictions [of which] are based on a regression analysis that uses the entire history of mandatory international football matches since 1960”.

Such a statistical analysis of the beautiful game sounds similar to that employed by the financial services industry to create mortgage-backed securities, and so perhaps it is best to go with your heart rather than the data when picking a winner.

There is, however, an economics slant to both Deutsche Bank and Goldman Sachs’ research.

Deutsche Bank explains that there is a small equity market impact for winning teams but also that rates volatility tends to reverse course after a World Cup.

Goldman Sachs, meanwhile, outlines the pre- and post-tournament performance of the winner’s (and host’s) MSCI country stock market index compared to the MSCI ACWI index.

The average post one-month relative price return for the winning country since 1974 is US$3.5 and US$2.7 respectively. But after a year this drops off to minus US$4 and minus US$4.4 respectively. Something to chew on for Brazil and the country that wins the cup.

Crunching the numbers

Of course, Goldman Sachs and Deutsche Bank are not alone in taking an alternative approach to the Greatest Show on Earth.

One of Haymarket’s own has also run the numbers.

David Newton, Finance Director, Asia, Haymarket Media, has compiled an online alternative view of World Cup history – called WorldCupStory – which is not merely based on the usual statistics of goals scored or matches won.

“In my experience, books and, indeed, websites, about the World Cup take the same form; they are usually very earnest factual match reports of what happened, without actually coming out and taking a stance on what may have been wrong, controversial or just plain daft,” Newton told FinanceAsia at the water cooler.

He digs out nuggets that serve to highlight trends in the competition, such as which domestic team has contributed most to World Cup-winning teams: Inter Milan in case you were wondering.

“I have used the data to tackle some of the great World Cup debates on players; was Pele (pictured) better than Maradona? Was Gerd Muller a sharper finisher than Ronaldo?” Newton said.

On the site, Newton succinctly describes why football fans care about such data – whether it is tied to economics, politics or geography. “There should be no debate as to who is the best team after a World Cup, but sometimes there is.”

In short, everything is up for discussion, which is why the game is so popular, and so hats off to Goldman Sachs, Deutsche Bank, UBS and the like for entering into the spirit of the occasion.

As such, this writer is sticking his neck out that Germany will win the World Cup; which has nothing at all to do with economics or stock market performance, nor indeed picking them in the office sweepstake today.

And yet, YET, Austria won the Eurovision song contest this year, while Atletico Madrid won the Spanish league title, Real Madrid won the European Cup (i.e. Champions League) and a 2-goal deficit was overturned in the English FA Cup final -- won by Arsenal. The last time all this happened? 1966. Stranger things have happened.

 

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