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Posts Tagged ‘FIFA rankings’

Econometrics and the most significant World Cup performance value drivers

Tuesday, June 22nd, 2010

In two previous blog posts we have presented different methodologies incorporating a variety of correlations, constructed by consultants from Goldman Sachs and J.P Morgan to determine the most probable winners of the World Cup 2010.

Today we will bring to your attention a third perspective, an econometric model adapted by PricewaterhouseCoopers consultants for analyzing the most influential drivers of World Cup performance and determine which are the most likely national teams to win this year’s World Cup edition.

For calculating the econometric model 2 broader measures for national performance in football were taken into consideration:

• Total World Cup Points ever gained at a final tournament, where one victory counts for 3 points and a draw for 1

• Total FIFA World Ranking points

Source: PricewaterhouseCoopers, 2010

These 2 main measures were than separately correlated in the econometric model developed with what were considered to be three of the most important external drivers of world cup performance.

• Gross Domestic Product (GDP) per capita

• Population size

• Host country advantage

The results of the econometric analysis showed out that while population size and gross domestic product are statistically insignificant for determining the most probable winners of the World Cup, the two constants from the model, the historic World Cup performance and the FIFA world ranking together with the host country advantage driver demonstrated to be the most important factors that count for determining the World Cup winners.

More than that, the advantage of the host country seems to have a highly significant positive effect in determining the teams who will have good performance at the World Cup. Host crowd support and familiar climate conditions are probably two significant factors in that respect.

As the table below shows, only the Spanish team outperformed at the 1982 World Cups, the hosts of the other World Cup editions having decent, if not even brilliant performances. Thus, countries such as Ghana, Nigeria or South Africa are likely to have good performances at the World Cup 2010 edition, even though it is hardly believable that they will be able to win the tournament.

Source: PricewaterhouseCoopers, 2010

Finally, according with the three most important drivers or determinants of World Cup performance, as showed by the PricewaterhouseCoopers econometric model, Brazil is the most likely team to win the World Cup. It is ranked on the first place both in the Historical World Cup performance ranking and in the FIFA World rankings and is the only team who has ever won a world cup title outside of its own continent.

References:

PricewaterhouseCoopers 2010, What can econometrics tell us about World Cup performance?, available at http://www.pwc.com/fi_FI/fi/tiedotteet-2010/tiedostot/Drivers_of_World_Cup_success_May2010.pdf, (accessed 21 June 2010)
PricewaterhouseCoopers 2010, Power vs passion: Wealth comes second to location and tradition when projecting World Cup winners, available at http://www.pwc.com/ru/en/press-releases/2010/Power-v-passion.jhtml, (accessed 21 June 2010)

Additional resources:

smartkpis.com 2010, KPIs Blog, Investment bankers views on the 2010 World Cup South Africa – England likely to win the World Cup, available at http://www.smartkpis.com/blog/2010/06/17/investment-bankers-views-on-the-2010-world-cup-south-africa-england-likely-to-win-the-world-cup/, (accessed 21 June 2010)
smartkpis.com 2010, KPIs Blog, Investment bankers views on the 2010 World Cup South Africa – The World Cup and Economics 2010, available at http://www.smartkpis.com/blog/2010/06/15/investment-bankers-views-on-the-2010-world-cup-south-africa-the-world-cup-and-economics-2010/, (accessed 21 June 2010)

Tags: Econometric model, FIFA rankings, Football, PricewaterhouseCoopers, World Cup 2010
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Investment bankers views on the 2010 World Cup South Africa – England likely to win the World Cup

Thursday, June 17th, 2010

In a previous blog post we presented the Goldman Sachs Investment Research Division report on “The World Cup and Economics 2010″. Besides forecasting football scores and rankings, the report also presents some interesting correlations between the FIFA world rankings and two economic indicators: Gross National Product (GNP) per capita and Growth Environment Scores (GES).

In today’s post we present a second report on World Cup 2010, currently released by J.P. Morgan Europe Equity Research Division.

The J.P. Morgan report “A Quantitative Guide to the 2010 World Cup” predicts that according to the forecasting algorithm used, England is likely to win the 2010 World Cup edition.

Although the initial World Cup Model Score shows Brazil as the strongest team taking part at the tournament, further correlations with the fixture table give England as the World Cup winners, followed on the 2nd place by Spain and on the 3rd place by Netherlands.

Source: J.P. Morgan 2010 – A quantitative report to winning the World Cup 2010

The forecasting algorithm used is based, according with the JP Morgan experts, on a successful Quant Model developed by J.P. Morgan over the years, which combines in its current adapted methodology: market prices, FIFA rankings, historical results and the J.P. Morgan team strength indicators. All these metrics, but also many others that were not mentioned above, are grouped in what is called the J.P. Morgan Cazenove Quant World Cup-Picking Model presented below.

Source: J.P. Morgan 2010 – A quantitative report to winning the World Cup 2010

Three of the most interesting and flavored metrics used in this model are:

• Consistency in Market Sentiment: Average (Probability of Winning) / (Max (Probability of Winning) – Min (Probability of Winning))

In terms of this metric, Brazil, England and Ivory Coast provide less risk in terms of the results surprise.

• J.P. Morgan Cazenove Success Ratio Indicator: it is calculated by computing the Win Ratio (Proportion of wins from the total number of games played) and scaling it by FIFA World Ranking

In terms of this metric, Netherlands, Spain, Chile and Brazil should be preferred, when picking a winner for the World Cup 2010.

As the model in its current structure takes in consideration only fixture results from the normal playing time interval, a new metric was decided to be introduced in order to cover the probability of a drawn match in the knockout phases.

• Penalty shootout metric: combines ability to score with goalkeeper ability using the formula shown below.

In terms of this metric, England, Spain, Netherlands and Germany are the favorites to win the World Cup.

Other noticeable facts that are outlined by the report are the World ranking vs probability of winning correlations which show that there are a few disagreements between FIFA World Ranking and the low probability of winning, in the cases of Portugal, Netherlands, Greece or high probability of winning, in the cases of England, Argentina and Ivory Coast.

Source: J.P. Morgan 2010 – A quantitative report to winning the World Cup 2010

Additionally to these findings, a final aspect that the J.P. Morgan report indicates is that the 3 favorite teams, as outlined by the World Cup Model Score: Brazil, Spain and England represent a 52, 5% probability of winning the World Cup.

However, despite all these predictions, football fans should still keep up in mind at all times that the “ball is round” and that football is by its nature an unpredictable game. No later than last night, Spain, the European Reigning Champions were defeated with 1-0 by their Swiss opponents, which started as outsiders, in a game from the first round of the group stage at the South Africa World Cup 2010.

References:

J.P. Morgan 2010, A Quantitative Guide to the World Cup, available at, http://www.scribd.com/doc/31537878/JP-Morgan-Quantitative-Guide-to-World-Cup-2010, (accessed 17 June 2010)
smartkpis.com blog 2010, Investment bankers views on the 2010 World Cup South Africa – The World Cup and Economics 2010, available at http://www.smartkpis.com/blog/2010/06/15/investment-bankers-views-on-the-2010-world-cup-south-africa-the-world-cup-and-economics-2010/, (accessed 17 June 2010)

Tags: FIFA rankings, Football, Indicators, JP Morgan, Metrics, The Quant Model, World Cup 2010
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Investment bankers views on the 2010 World Cup South Africa – The World Cup and Economics 2010

Tuesday, June 15th, 2010

The 2010 report on the The World Cup and Economics was recently released by the Global Investment Research Division of Goldman Sachs. Besides forecasting football scores and rankings, the report presents an analysis regarding the correlation with other types of indicators within the World Cup context, such as:

Gross National Product (GNP) per Capita – measures the dollar value of the outputs (goods and services) produced within a country, divided by the number of its citizens (smartkpis.com, 2010)
Growth Environment Scores (GES) – represents a composite measure of growth conditions for 170 countries, aimed at summarizing the overall growth environment. Goldman Sachs introduces the GES in 2005, to rank countries according to their ability to achieve their growth potential. (Goldman Sachs, 2006)

After testing statistically both GNP per capita and GES with the current FIFA rankings, the conclusions were:

The correlation between GNP per capita and the current FIFA rankings is –0.17, lower than the correlation in 2006 (–0.41), this being an indication of a weak relationship between GNP per capita and a country’s FIFA ranking.

FIFA World Cup Rankings vs GNP per Capita (Goldman Sachs 2010)

Overall, the correlation between GES and FIFA rankings is also weak, only –0.07. For developed countries, the correlation is 0.29, while for developing countries it is –0.004. A reason for this low correlation level is Brazil and Argentina, for which, their GES cannot explain their high ranking.

GES and FIFA Ranking correlation score (Goldman Sachs, 2010)

Improvement in GES and FIFA Ranking (Goldman Sachs, 2010)

For the smaller emerging markets, the improvement in GES could conceivably be associated with better infrastructure and funding facilities for football. For example, Algeria has improved the most among developing countries, in both its GES and FIFA ranking. (Goldman Sachs 2010)

At its fourth edition, World Cup and Economics 2010 report presents also football statistics and odds for each country, offering even an intriguing exercise that calculates probabilities for the likely winner of the Cup.

References:

Goldman Sachs 2010, The World Cup and Economics 2010, available at: http://www2.goldmansachs.com/ideas/global-economic-outlook/the-world-cup-2010-doc.pdf (accessed 7 June 2010)

Goldman Sachs 2006, You Reap What You Sow: Our 2006 Growth Environment Scores, available at: http://www2.goldmansachs.com/ideas/brics/book/BRICs-Chapter6.pdf (accessed 7 June 2010)

smartkpis.com (2010), Gross national product per capita, available at http://www.smartkpis.com/kpi-key-performance-indicator/gross-national-product-per-capita-2902.html (accessed 14 June 2010).

Tags: FIFA rankings, Football, Goldman Sachs, Gross National Product per capita, Growth Environment Scores, The World Cup and Economics, World Cup 2010
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