The football fever is over. France, the winner predicted by Nomura, lifted the World Cup for the second time. Nowadays, investment banking firms are predicting the outcome of World Cup Football matches and on certain occasions, of cricket matches too, using big data analytics.
Goldman Sachs, which used machine learning to run two lakh models, mined data on teams and individual player attributes and then simulated the output with one million possible variations of the tournament, to calculate the probability of advancement for each squad.
After assimilation of various models, its prediction was that Brazil would win its sixth World Cup title, defeating Germany in the final.
It said that France had better overall odds of lifting the trophy, with its meeting with Brazil in the semi-finals making it fall short of the title match. England was expected to make it to the quarter-final stage, where they would lose to Germany. Spain and Argentina would underperform, both losing in the quarter-finals.
Russia was not expected to make it out of the group stage at all, despite its role as tournament host.
It finally saw Saudi Arabia as the surprising team that would advance out of the group stage, ahead of the host nation.
Another investment banker, UBS was the first of the banks to predict the outcome of Football World Cup, using econometric tools normally used to assess investment opportunities.
According to its artificial intelligence and big data analytical tool, Germany took the top spot followed by Brazil, Spain and England came in fourth most likely to lift the cup. UBS said its simulations indicated that England, France, Belgium and Argentina “still have a realistic chance of lifting the trophy.”
Even, Nomura, which correctly predicted that France would lift the World Cup, erred in predicting the runner-up, as it had expected Spain in the Finals.
Memes
After these predictions came untrue a lot of memes are circulating in the social media poking fun at the investment bankers.
So, should we trust the words of the investment bankers? How reliable are these artificial intelligence or big data analytics and statistical models?
While it is very easy to dismiss and make fun of these predictions, these bankers nevertheless do provide indications, or warnings that most lay investors may not be aware of. Therefore, it makes sense to give some weightage to their words of caution while doing our own homework before taking their optimistic predictions at face value.
Experts suggest, avoid basic mistakes such as buying what you don’t understand, do not take a short-term view on your investment portfolio, stop believing the financial press is expert, and stay away from penny stocks.
Tailpiece
Goldman Sachs’ Tim Moe’s prediction for India: “The benefits of a good monsoon season flood through India’s agriculture-dependent economy — and this year the potential is greater than most, given political shifts that could come with the 2019 general election cycle.”
Moe expects an incremental bias toward more spending on the rural economy, which combined with a good monsoon, could drive growth in both India’s economy and key sectors of its equity market.
“India is probably one of the foremost examples where the capriciousness of the weather cycle can detract from the structural growth potential that we’re seeing,” he said.