FIFA World Cup 2018 Predictions - Fidante Partners
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
FIFA World Cup 2018
Predictions
Joachim Klement, CFA 24 April 2018
• Every four years, the world’s best football teams meet at the FIFA World Cup to determine
who is best. And every four years economists create silly statistical models to predict
which team is going to win the championship.
• We are no exception to this rule. This is our not so serious prediction for the upcoming
World Cup. Enjoy.
PAGE 2
Introduction
On 14 June 2018 the 21st FIFA World The remainder of this paper is organised as
Cup will open in Russia. 64 matches will follows. In the next section I will clarify some
be played until on 15 July 2018 the world common misunderstandings about football
champion of football is crowned at the final and explain the model, its input factors and
in Moscow. Every four years 32 teams from its methodology. Then, I will briefly tackle
around the world compete against each other the group stage of the World Cup in order
to figure out who is the best nation in what to determine which teams will make it into
I can only describe as “the best sport in the the knock-out stage. The final section then
world and a modern day religion”. And every simulate the knock-out stage in order to
four years, economists from every major determine the likely winner of the World Cup.
bank in the world will try to predict the
winner of the World Cup in advance using
more or less ridiculous econometric models
in an attempt to seem more “fun” than
economists usually are. If you expect concrete investment advice,
stop reading now.
Before we get into the details of the model,
Tongue firmly in cheek, I will explain however, let me warn all the readers of this
which team will win this year’s World Cup. report. If you expect concrete investment
advice, stop reading now. Some economists
try desperately to make these reports about
investments by choosing German automotive
stocks to represent Germany and the like.
Being the “fun” economist that I am, I will
But let’s face it. Trying to predict a football
join this chorus of World Cup predictions.
tournament with the help of an econometric
Tongue firmly in cheek I will explain which
model is outrageous in itself already. No
team will win this year’s World Cup and why
need to make it even more outrageous than
you can safely ignore the dozens of reports
that.
from other banks on the subject.
To address the last point first: In this
report I will use an updated version of the
econometric model I used four years ago to
predict Germany as world champion 2014
(including a victory of Germany in the semi-
finals against Brazil). This model has a 100%
success record which is clearly higher than
any model other economists use. Also, the
model is developed and run by a German
which is why in our 2014 predictions the
seasoned judgement of the modeller was
used to change the predicted outcome of the
semi-final between Germany and Brazil from
a victory for Brazil to a victory for Germany.
It is this genetically inherited knowledge
about football that makes the combination of
economist and model superior to any model
developed by an English or an American
economist.PAGE 3
The model
The model I use is a regression-based players. This means that countries
model that tries to predict the percentage that are too poor have a hard time
of games won by each country in past World building and maintaining the necessary
Cup appearances. For example, Brazil has training and medical infrastructure to be
historically been the most successful team successful on the big stage. At the same
at previous World Cups and won on average time, the relationship between a nation’s
67% of all the matches it participated in. At wealth (as measured by GDP/capita)
the other end of the spectrum are World Cup and its success in football is non-linear.
newcomers, Panama and Iceland, that have Very wealthy nations like Switzerland
never qualified for a World Cup before. These or Luxembourg may have the money to
two teams, together with Egypt, have never build the necessary infrastructure but
won a match at a World Cup so far and thus cannot recruit enough youngsters for
have a winning percentage of zero. their youth teams. Effectively, football
remains a sport played by working class
In order to avoid confusion, let me be clear
and middle class people. If a nation
that the term “football” in this report refers
is too wealthy, the youngsters rather
to the sport called “football” in England and
participate in more expensive hobbies or
across the British Isles. It is a game played
simply play video games instead of going
by 11 men or women in each team where
outside to play football on the street.
the ball is kicked by foot (hence the name)
and only the goalkeeper is allowed to use • Average temperature: Football is an
his or her hands under certain restrictions outdoor sport. It is difficult to play
that I won’t go into here. The game lasts football year-round if the climate in a
90 minutes and is split into two halves country is too cold or too hot. It turns
(plus some injury time in each half at the out that a temperate climate with an
discretion of the referees but I can’t get into average annual temperature of 14C is
this either). A goal counts as one point (not optimal.
three, six, seven or whatever funny number
• Population: Of course, if a country has
you happen to make up) and it is perfectly
more citizens, the talent pool is bigger.
normal for a game to end 0-0.
Thus the share of a countries population
The game that Americans call “football” has as percentage of world population is
nothing to do with football whatsoever and is another determinant of football success.
effectively rugby for Nancies. And what our
• Being the host: Time and again the
Australian friends and colleagues call “footie”
home field advantage proves crucial
is also not football but rather a glorified pub
in determining success at a World Cup.
brawl.1
England won its only World Cup, 1966 at
In order to predict the winning percentage of home. In 1958 host Sweden celebrated
World Cup games for every team I use the its biggest World Cup success ever when
following macroeconomic variables: it only lost in the final to Brazil with the
immortal Pelé. And South Korea’s biggest
• GDP/capita: While football can be played
World Cup success was the semi-final at
anywhere, a successful national team
the 2002 home tournament. Clearly, the
needs appropriate infrastructure and a
home team has a distinct advantage over
systematic support for talented young
other teams and our model indicates
1 If you do not believe me then I recommend
that on average the home team is about
the 2016 AFL Injury Survey (http://s.build001. one third more likely to win a game
aflprod.com/staticfile/AFL%20Tenant/AFL/2016- than a foreign team with the same
AFL-Injury-Survey.pdf), which documents that on qualifications.
average players in each club missed 139.8 games
in the 2016 season and lists the prevalence of
injuries such as concussions, facial fractures, ACL
injuries, forearm, wrist, and hand fractures, and
thoracic spine injuries etc.PAGE 4
• FIFA ranking: The FIFA ranking of advance to the next round. If on the other
national teams is based on the results hand the random chances for team A and B
of international games in friendlies and would have been the reverse, team A would
competitive matches of the last few have achieved a total score of 45% + 70%
years. Thus, the FIFA world ranking = 115% and team B would have achieved a
provides a crucial input about the recent total score of 35% + 30% = 65% and team
strength of a team. A progresses to the next round.
Many of these variables have been used in
academic studies to explain football success2
and my model explains about 44% of the
variation in winning percentage amongst
teams. Of course, this also means that about
56% of the variation in winning percentage
is unexplained by these factors and due to
luck or other idiosyncratic factors. In order
to account for this, I have added an element
of chance to determine the winner of each
game in the knockout stage.
Once a team reaches the knockout stage
or even the quarter- and semi-finals there
are no easy opponents left. So winning
depends to a larger and larger extent on the
form of each team on the day the match is
played. The model accounts for this element
of chance by adding a random chance of
winning to the actual winning percentage of
each team.
For example, assume team A has a winning
percentage of 45% according to the model
prediction, while team B has a winning
percentage of 35%. Note that the winning
percentages do not have to sum to 100%
because they only measure how often a
team won a match in a statistical average,
not in a head to head with a specific team.
Now we add a random winning chance for
team A and B for the specific match of A
vs. B. Let’s assume that the random draw
concludes that team A has a 30% chance of
winning, while team B has a 70% chance of
winning. If we add the model prediction of
team A and the random chance of winning
for team A we get a sum total of 45% + 30%
= 75% and for team B we get 35% + 70%
= 105%. In other words, team B was able to
overcome the advantage team A had based
on its model prediction and team B would
2 R. Hoffmann, L. C. Ging, and B. Ramasamy,
(2002). “The Socio-economic determinants of
international soccer performance.” Journal of
Applied Economics, Vol. 5 (2), 253 – 272. And
yes, I could not believe that someone actually
published a paper about this either.PAGE 5
Predicting the group neck for second place. In a thrilling match,
Croatia wins 1-0 against Iceland in injury
stage time and we have to bid goodbye to the
Vikings that have given us so much pleasure
Let’s move on from the theory of a model
in recent years.
to the practicalities of the tournament. The
tournament starts with a group stage where Group E: No team is even going to touch
four teams in each group play against each Brazil in this group and the Selecao takes
other to determine the two best teams that the group by storm. In second place is
will advance to the knockout stage. Switzerland with comfortable victories over
Costa Rica and Serbia.
Group A: Russia had the luck of the draw in
group A and got arguably the easiest group Group F: This is the group with Germany and
of all. Unsurprisingly, with the home field of course, “Die Mannschaft” will take the top
advantage, Russia is favourite to win the spot, while Mexico qualifies as second placed
group, while Uruguay is destined to come team.
second. However, with an upset victory over
Group G: As always, the English team counts
Uruguay, outsiders Egypt will make it into
itself as part of the favourites to win the title.
the knockout stage as second place team.
And as always nobody outside the UK thinks
they have the slightest chance to win the
title. With Belgium as one of the best teams
With an upset victory over Uruguay, in the tournament in their group, England
will only end up taking second place after
outsiders Egypt will make it into the Belgium, but the nation will not lose hope
knockout stage. that they might win the trophy this time
after all.
Group B: Morocco and Iran can only advance Group H: Poland with star striker Robert
to the knockout stage if Spain and reigning Lewandowski and Colombia with James
European champion Portugal stumble. And Rodriguez are favourites to advance to the
this is very unlikely. It is about as likely as knockout stage. Senegal, however, deserves
me pogo-sticking up Mount Everest – not an honourable mention for giving both teams
impossible, but very unlikely. So Portugal a run for their money.
and Spain advance with Portugal as group
winner based on goal difference (thank you
Christiano Ronaldo).
Group C: France will easily win the group
while Denmark and Peru battle for second
place. In the end Peru has a slight advantage
over Denmark and takes second place.
Group D: Argentina is favourite to win the
group but Iceland and Croatia are neck and
Figure 1: The results of the group stage
Group A Group B Group C Group D Group E Group F Group G Group H
Russia Portugal France Argentina Brazil Germany Belgium Poland
Egypt Spain Peru Croatia Switzerland Mexico England Colombia
Uruguay Iran Denmark Iceland Costa Rica Sweden Tuinisia Senegal
Saudi Arabia Morocco Australia Nigeria Serbia South Korea Panama Japan
Source: Fidante Capital.PAGE 6
The last 16: No surprises Some exciting quarter-
here finals
The results from the group stages pit Russia All these developments lead to mouth-
against Spain in the last 16. And no matter watering quarter-finals. Each of the four
how big the home field advantage, Spain matches has the potential to become a
clearly dominates Russia in this match and match for the ages and in each match, both
reaches the quarter-finals with ease. There teams have a good chance of winning. In the
they will face a formidable France. The end the team with the better tactics on the
young French team has shown impressive day or the little bit of extra luck will advance
football throughout the group stage and win to the next round.
easily against Croatia.
Quarter-final 1: Spain, the world champion
In a Latin American match, Brazil faces of 2010 meets France, the world champion
Mexico in the third match of the last 16. The of 1998. The Spanish team is clearly past
cold weather in Russia makes it hard for both its peak with players such as Piqué, Andrés
teams to play good football but in the end Iniesta, David Silva, or Sergio Ramos all 30
Brazil succeeds and advances to the quarter years or above. Younger players like Thiago
finals. (26), Álvaro Morata (25) or Alberto Moreno
(25) are good players, but just not the class
In the fourth match of the last 16 Belgium
of the previous generation. And the lack of
is favourite to win against Colombia and
a great goal scorer also makes it difficult
does so convincingly. Belgium, together with
to succeed against a world class team like
France play the most impressive football
France. France, on the other hand, fields a
of the tournament so far but their next
young team with formidable offensive power.
opponent in the quarter-finals will be none
Antoine Griezmann, Alexandre Lacazette and
other than mighty Brazil.
Kylian Mbappé are supported by wingers like
Next up in the first round of the knockout Kingsley Coman and Ousmane Dembelé. In
stage is Egypt vs. Portugal. Even though the end France simply outscores Spain to
Portugal does sometimes have difficulties advance to the semi-final.
playing against underdogs, outsiders Egypt
Quarter-final 2: Brazil vs. Belgium. The
are no match and Portugal advances to the
most successful team in the history of
next round.
the World Cup against the up and coming
Argentina also has no problems with Peru European force. Brazil is heavy favourite
in its knockout match and easily advances but in the end Belgium wins on penalty
to the quarter finals, where they will face kicks. Belgian goalkeeper Thibaut Courtois
Portugal. becomes the hero of a nation when he
saves the decisive penalty. It is Barcelona’s
The seventh match in the round of the
Paulinho who misses the penalty and will
last 16 will take place between Germany
end up on the front page of every Brazilian
and Switzerland. Honestly, I can’t even be
newspaper the next day, but not in a good
bothered to comment on this one. Germany
way. The attacks against him in the media
beats Switzerland 3-0.
and in social networks are so vicious that
Finally, the match between Poland and Paulinho decides to retire from the Selecao
England completes the round of the last the next day.
16. For the first time in this tournament it
becomes obvious how dependent Poland is
on Robert Lewandowski. With Lewi in bad
shape for the match and not scoring, it
falls to Harry Kane to take England into the
quarter-finals.PAGE 7
Quarter-final 3: The third quarter-final is An all-European semi-
Portugal against Argentina. Ronaldo against
Messi, the best player of 2017 against the
final
best player of all time, the man who says of
The semi-finals turn out to be a completely
himself that he was sent by God to show the
European affair with France playing Belgium
world how to play football against the man
and Portugal going head to head with
who is God. The man who scored his first
Germany. All the teams are evenly matched
hat-trick at the age of 23 against the man
and so France wins due to an undeserved
who had a hat-trick of Ballon d’Ors at age
penalty in the 72nd minute and ends the
23. Well, in any case, Messi is injured in the
World Cup dreams of the Belgian team. Both
quarter-final and can’t play so Portugal wins
teams have played an exciting football but
2-1.
the pressure of a World Cup semi-final was
clearly visible in this match. None of the
teams wanted to make a mistake as is so
often the case in high stakes World Cup
The third quarter-final is Portugal against
games and in the end France simply is the
Argentina. Ronaldo against Messi, the luckier team of the two. But the Belgian
best player of 2017 against the best players can be proud of themselves. The
future is clearly theirs and they will be a
player of all time.
force to reckon with in the 2020 Euros.
Quarter-final 4: Here it is. Germany The second semi-final between Germany
vs. England – again. Let’s review the two and Portugal is also a close affair. Ronaldo
opponents here. Germany has Manuel Neuer, opens with an early goal to take the lead
the best goalkeeper in the world, Mats for the reigning European champion against
Hummels and Jerome Boateng, the best the reigning world champion. But Germany
centre backs in the world, Mesut Özil, the strikes back quickly with a beautiful goal
man with the most assists in the Premier from Özil. The game turns out to be similarly
League since 2013, Thomas Müller, top entertaining as the legendary match for third
goal-scorer of the World Cup 2010 and the place at the 2006 World Cup. And the result
man with more goals in a World Cup than turns out to be the same as well. 3-1 for
the entire England squad put together. And Germany.
England has Harry Kane.
The teams have met in a World Cup five
times. In the final of the 1966 World Cup The semi-finals turn out to be a
England won 4-2. So much for the glory
completely European affair with France
days of England. In 1970, Germany won 3-2,
in 1982 the teams met at the group stage playing Belgium and Portugal going head
and drew 0-0. In 1990 England lost against to head with Germany.
Germany in the semi-finals in a penalty
shoot-out. In 2010 Germany won against
England in the last 16 4-1. Of the last fifteen
matches against each other England won
three. I am completely objective when I
predict that Germany will advance to the
semi-final.PAGE 8
And the winner is…
Which brings us to the final between France
and Germany. Germany is the favourite to
win this match and defend a world title for
the first time since Brazil in 1962. But the
French team is hungry for the title and their
manager Didier Deschamp has prepared
them well for the challenge. In the end the
team that has played the most attractive
football of the tournament wins. France
beats Germany 2-1 and becomes world
champion for the second time.
So there you have it. France will win the
World Cup 2018. Given the statistical
accuracy of my model you don’t even have
to bother watching the games anymore.
Just go and put some money on France and
come back in July with a grin on your face
to collect your winnings. The current odds of
France winning the World cup are 6/1 by the
way.
Figure 2: The knockout stage
France
France Germany
France Belgium Portugal Germany
Spain France Brazil Belgium Portugal Argentina Germany England
Russia France Brazil Belgium Egypt Peru Switzerland England
Spain Croatia Mexico Colombia Portugal Argentina Germany Poland
Source: Fidante Capital.PAGE 9
PAGE 10
Disclaimer
This is a marketing communication and is not, and should arise in the production of non-independent research,
not, be considered as independent investment research. including preventing dealing ahead and Fidante Partners
It is issued by Fidante Partners Europe Limited (“Fidante operates a conflict of interest policy in regard to research.
Partners”) which is authorised and regulated by the This includes physical and electronic information barriers
Financial Conduct Authority (“FCA”). Fidante Partners procedures and the operation of a cultural Chinese Wall.
Europe Limited trades as “Fidante Partners” and “Fidante For further information, please view the following policies:
Capital”. Fidante Partners Europe Limited is a wholly Conflicts of Interest, Chinese Walls Policy, Information
owned subsidiary of Challenger Limited, a company listed Barrier Procedures.
on the Australian Securities Exchange Limited.
Fidante Partners acts as a market maker, corporate broker
This marketing communication is for persons who are and, from time to time, bookrunner to companies in the
Eligible Counterparties or Professional Clients (for the closed-end listed investment company sector. A list of all
purposes of the FCA rules) only and it is not available companies in relation to which Fidante Partners acts as
to Retail Clients. It is being distributed (a) in the United market maker and/or corporate broker and/or bookrunner
Kingdom to, and is directed only at, persons who are (and the relevant dates of any closing of any such
(i) investment professionals as defined in Article 19 of capital raise) can be viewed here: Market Making Stocks,
the Financial Services and Markets Act 2000 (Financial Corporate Appointments
Promotion) Order 2005 (the “Promotion Order”) or (ii)
Fidante Partners may have an economic interest (for
are persons to whom this marketing communication may
example, minority equity interest or fee entitlement) in
otherwise lawfully be issued or passed on or (b) outside
investment managers of the funds of which it provides
the United Kingdom to, and is directed only at, persons
services (such as corporate finance, listing sponsorship,
to whom this marketing communication may be lawfully
market maker, corporate broker and bookrunner).
issued or issued without compliance with any filing,
registration, approval or other requirement in the relevant Please click here for the Fidante Partners research policy.
jurisdiction, and in each such case without the inclusion
This marketing communication does not constitute a
of any further warnings or statements as required by the
personal recommendation or take into account the
Promotion Order, or other applicable law or regulation,
particular investment objectives, financial situation
which are not included in this marketing communication
or particular needs of any specific recipient. It is not
(all such persons together being referred to as “relevant
intended to provide the sole basis for any evaluation of
persons”). Neither this marketing communication nor any
an investment decision. Your attention is drawn to the
of its contents may be received by, acted on or relied on
date of issue of this marketing communication and of the
by persons who are not relevant persons.
opinions expressed herein. Before acting on any advice
No part of this marketing communication may be or recommendations in this marketing communication,
published, distributed, extracted, re-utilised or recipients should consider whether it is suitable for
reproduced and any attempt to do so may be restricted their particular circumstances and, if necessary seek
or prohibited by law. Recipients are required to inform professional advice, including tax advice. Recipients
themselves of, and comply with, all such restrictions or of this marketing communication should note that: All
prohibitions and none of Fidante Partners or any other investments are subject to risk; the value of shares may
person accepts liability to any person in relation thereto. go down as well as up; you may not get back the full
amount that you have invested; past performance is not
Fidante Partners does not produce independent
a guarantee of, and cannot be relied on as a guide to,
investment research within the meaning of the FCA
future performance; fluctuations in exchange rates could
Handbook of Rules and Guidance. Accordingly, this
have adverse effects on the value or price of, or income
marketing communication is non-independent research
derived from, certain investments.
within the meaning of those rules, which means it is a
marketing communication under the Markets in Financial This marketing communication is for informational
Instruments Directive (“MiFID”) and it has not been purposes only and does not constitute, and should not
prepared in accordance with legal requirements designed be viewed as, an offer, invitation or solicitation in respect
to promote the independence of investment research, and of securities or related other financial instruments nor
it is not subject to any prohibition on dealing ahead of the shall it be construed as a recommendation for Fidante
dissemination of investment research. However, Fidante Partners to effect any transaction to buy or sell securities
Partners has policies to manage the conflicts which may or related financial instruments on behalf of any recipientPAGE 11
nor shall it, or the fact of its distribution, form the basis materially from those expressed or implied by statements
of or be relied upon in connection with, any contract or in this marketing communication. Fidante Partners, nor
commitment in relation to such action. The securities that any other person intends, and no person assumes any
may be described in this marketing communication may obligations, to update information or statements set forth
not be eligible for sale in all jurisdictions or to certain in this marketing communication. You should not place
categories of investors. reliance on forward-looking statements which speak only
as at the date of this document.
This marketing communication is based upon information
which Fidante Partners considers reliable, but such Where references to external resources such as internet
information has not been independently verified and no websites are provided these are for reference purposes,
representation is made that it is, or will continue to be and the external resources are not intended to be
accurate or complete and nor should it be relied on as included as part of this publication; Fidante Partners plc
such. This marketing communication is not guaranteed to has not checked and is not responsible for any external
be a complete statement or summary of any securities, content, and makes no representation as to its reliability
markets, documents or developments referred to in this or accuracy.
marketing communication.
Any dispute, action or other proceeding concerning this
Any statements or opinions expressed in this marketing marketing communication shall be adjudicated within the
communication are subject to change without notice. exclusive jurisdiction of the courts of England. All material
Neither Fidante Partners, any member of the Challenger contained in this marketing communication (including in
Limited group nor any of their directors, officers, this disclaimer) shall be governed by and construed in
employees or agents shall have any liability (including accordance with the laws of England and Wales.
negligence), however arising, for any error, inaccuracy
Fidante Partners Europe Limited
or incompleteness of fact or opinion, or lack of care, in
this communication’s preparation or publication; provided Authorised and Regulated by the Financial Conduct
that this shall not exclude liability which Fidante Partners Authority
has to a customer under the Financial Services & Markets
Fidante Partners Europe Limited trades as “Fidante
Act 2000 or under the Rules of the Financial Conduct
Partners” and “Fidante Capital”.
Authority.
Registered Office: 1 Tudor Street, London EC4Y 0AH.
This marketing communication contains certain forward-
Registered in England and Wales No. 4040660.
looking statements, beliefs or opinions. These statements
concern future circumstances and results and other
statements that are not historical facts, sometimes
identified by the words “believes”, “expects”, “predicts”,
“intends”, “projects”, “plans”, “estimates”, “aims”,
“foresees”, “anticipates”, “targets”, “may”, “will” and
similar expressions. Such statements reflect current
views with respect to future events and are subject to
risks and uncertainties because they relate to events
and depend on circumstances that will occur in the
future. These forward-looking statements are based on
current plans, estimates, projections and expectations.
These statements are based on certain assumptions
that, although reasonable at this time, may prove to be
erroneous. No statement in this marketing communication
is intended to be a profit forecast. No representations
or warranties, express or implied, are given as to the
achievement or reasonableness of and no reliance
should be placed on, such statements, including (but
not limited to) any projections, estimates, forecasts
or targets contained herein. Fidante Partners does not
undertake to provide any additional information, update
or keep current information contained in this marketing
communication, or to remedy any omissions in or from
this marketing communication. There are a number of
factors that could cause actual results, developments,
financial targets and strategic objectives to differPAGE 12
Contacts
Research Trevor Barnett
Joachim Klement +1 212 897 2807
+44 20 7832 0956 tbarnett@fidante-us.com
jklement@fidante.com
Adam Randall
Martin McCubbin +1 212 897 2807
+44 20 7832 0952 arandall@fidante-us.com
mmcubbin@fidante.com
Market Making
Aliy Akbarov
STX 79411 79412
+44 20 7832 0957
aakbarov@fidante.com Mark Naughton
+44 20 7832 0991
mnaughton@fidante.com
UK Sales
Daniel Balabanoff
+44 20 7832 0955 Product Development
dbalabanoff@fidante.com Tom Skinner
+44 20 7832 0953
Max Bickford
tskinner@fidante.com
+44 20 7832 0934
mbickford@fidante.com
Patrick Valentine Corporate Finance
+44 20 7832 0932 John Armstrong-Denby
pvalentine@fidante.com +44 20 7832 0982
jdenby@fidante.com
Justin Zawoda-Martin
+44 20 7832 0931 Nick Donovan
jzawodamartin@fidante.com +44 20 7832 0981
ndonovan@fidante.com
International Sales
Christian Andersson
+46 8 1215 1360
candersson@fidante.com
Ian Brenninkmeijer
+46 8 1215 1361
ibrennikmeijer@fidante.comYou can also read
