And we all know those are never wrong, right?
With the 2010 World Cup a mere three weeks away, the trickle of investment bank World Cup research continues apace. Yes, suddenly all the analysts have become football experts going on bookies.
This time it’s JP Morgan’s turn — specifically, their quant team.
Here’s the summary:
• Quant Models are mathematical methods built to efficiently screen and identify stocks.
• They are based on information and data (analyst upgrades, valuation metrics etc) proven to help predict stock returns.
• Having developed a rather successful Quant Model over the years, we intend to introduce it to our readers and also use its methodology to apply it to a fruitful field for statistics: Football and the World Cup.
• In this Model, we focus on market prices, FIFA Ranking, historical results, our J.P. Morgan Team Strength Indicator etc to come up with a mathematical model built to predict match results.
• Ultimately our Model indicates Brazil as being the strongest team taking part in the tournament. However, due to the fixture schedule our Model predicts the following final outcome:
- 3rd: Netherlands
- 2nd: Spain
- World Cup Winners: England
• Alternatively, we point out that the 3 favourite teams (from market prices recorded on 30 April of 3.9-to-1 for Spain, 5-to-1 for Brazil and 5.4-to-1 for England) represent a 52.5% probability of winning the World Cup.
Before you go off placing bets though — there’s a JPM caveat:
Whilst this report should be taken with a pinch of salt, we find it an interesting exercise and an ideal opportunity to lightheartedly explain Quantitative techniques and demystify the typical Quant framework.
If we wanted to be mean now, we could say that any quant model that comes up with England as a 2010 World Cup winner is still mystifying. But err, we won’t.
Demystification Full note in the usual place.
