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World Cup and Investment Banks

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Senior Manager
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World Cup and Investment Banks [#permalink] New post 26 May 2010, 19:55
A little something interesting

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PICKING stock winners is an inexact science. Success is found using different methods, formulas and strategies, and a dose of luck is often needed too.

Brokerages and the analysts they hire are paid a lot of money to scour the earth for future winners. Pick stocks that make clients and the brokerage a lot of money and analysts are virtually guaranteed of a fat bonus at the end of the year.

Given the high-stakes game making stock recommendations are, it comes as no surprise to me that these well-paid analysts have applied a methodical and complex mathematical models in trying to figure the outcome of one of the most important events this year.

No, I am not talking about the chance of picking the next10-bagger or the probability of the debt problems of Europe ricocheting to the rest of the world.

Neither am I talking about the volatility of the euro and the potential break-up of the single currency and am certainly not discussing about bubbles emerging in China or other parts of Asia that may derail future growth.

What I am talking about is the World Cup, the biggest tournament of the greatest game in the world, and what are their picks as to which nation will win the trophy.

For a little bit of fun, three of the largest investment banks in the world recently produced reports on what they think will happen in the World Cup in South Africa which starts next month.

JPMorgan’s quantitative model picked Brazil as the strongest squad taking part in the tournament but, after looking at the schedules, it picked England as the potential winner.

That choice will certainly find favour from a lot of Malaysians who are fans of English football but there is something fundamentally wrong with its choice in my opinion.

JPMorgan has England winning its semifinal against the Netherlands on penalties and beating Spain in the final using spotkicks again.

Any football fan knows that England and penalty shootouts are like oil and water and for England to win two successive penalty shootouts with the quality of goalkeepers it has heading into the World Cup is near impossible.

No complex maths model is needed to predict that.

UBS, which actually used the World Cup to highlight top recommended stocks under its coverage, has picked Brazil with a 22% chance of winning using the model from its wealth-management personnel.

Its forecast for the semifinalists, and ranked in terms of chances of lifting the trophy, are Brazil, Germany, the Netherlands and Italy.

In a 67-page report, Goldman Sachs, which called its prediction model intuitive by a large extent, has Brazil as the favourites to lift the cup. Its second choice is Spain followed by Germany and England.

It said the element of the unexpected is a huge factor in the games and there is no disagreement from me on that account.

Past World Cups had seen favourites fizzle out in the group stage, a team get hot at the right time to bulldoze its way to victory and, in other times, follow the form book where the odds on the favourite prior to World Cup lifting the trophy at the end.

I will throw in my own analysis that is not based on quantitative models or some complex prediction method. Mine is more straight-forward and primal. It’s called the “gut-o-nomics.”

Sentimentality, team strength and history play a major part in my picks and here goes. My mind says Spain (world-class players in nearly all positions), my heart says Italy (after spell-binding late run in 1982) and my soul says England (being a fan of Liverpool since the age of six).

But I will not be surprised none of that materialises. Brazil, Argentina and Germany have the players and history to win it all. In the end that’s why they play the game to find the winner.

·Deputy news editor Jagdev Singh Sidhu is wondering how bad the toll of watching games into the wee hours of the morning will be on his body.

http://biz.thestar.com.my/news/story.as ... c=business
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Re: World Cup and Investment Banks [#permalink] New post 28 May 2010, 14:31
Mmmm, I can't believe they picked England.
Have they been looking at the recent form of their players?
Maybe I'm biased.

I think that Spain has a stronger squad than Brazil and England. Even Argentina has stronger players (but not a good coach unfortunately) than Brazil and England. But that doesn't mean anything in football.
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Re: World Cup and Investment Banks [#permalink] New post 16 Jul 2010, 09:27
World cup finished, time to grade the predictors:

JPMorgan predicted that England would win, finalist Spain, semifinalist Netherlands, and mentions that Brazil had the strongest squad.

UBS predicted the semifinalists as Brazil, Germany, Netherlands, Italy (ranked in chances of lifting the trophy).

Goldman Sachs predictions: Brazil, Spain, Germany, England.

Jagdev Singh Sidhu: Spain, Italy, England. Also with chances: Brazil, Argentina, Germany.

Results:
Champion: Spain.
Finalist: Netherlands.
Semifinalists: Germany, Uruguay.
Argentina and Brazil were out in the quarterfinals.
England was out in the round of 16.
Italy didn't make the group stage.

Now lets quantify: champion, 10 points, finalist 6, semifinalist 4, 1/8 2, 1/16 1, group stage 0.
JPMorgan: 19 points for the teams chosen, not for the rounds predicted.
UBS: 12 points.
Goldman Sachs: 17 points.
Jagdev Singh Sidhu (mentioned 6 teams): 19 points, prorated (19/6*4) 12,6.

The winner is JPMorgan!!!
And the looser is UBS (be careful of their wealth management model).
Re: World Cup and Investment Banks   [#permalink] 16 Jul 2010, 09:27
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