The World Cup is almost upon us (just two weeks until the first match), which means that our sharpest minds are joining together to help us place bets on which country will emerge victorious.
Goldman Sachs employees crunched numbers so hard that members of the firm's economic team "joke that they wish staff showed the same level of dedication for their day jobs," per the Wall Street Journal. The hardworking quants found that Brazil, which bears the honor/burden of hosting the event this year, is most likely to win, with a probability of 48.5 percent.
Goldman explains in the comprehensive report that they use information on matches dating back more than 50 years to calculate their findings:
The predictions for each match are based on a regression analysis that uses the entire history of mandatory international football matches — i.e., no friendlies — since 1960. This gives us about 14,000 observations to estimate the coefficients of our model. The dependent variable in the regression analysis is the number of goals scored by each side in each match.
According to the report authors, the results are surprising in how strongly they favor a win by Brazil.
They write that "it is hardly surprising that the most successful team in football history is favored to win a World Cup at home. But the extent of the Brazilian advantage in our model is nevertheless striking." Don't sleep on the financial wizards, either. In 2012, Goldman correctly predicted the exact number of medals that Great Britain would win at the London Olympics, and missed their gold count, by just one.
Goldman's team may be convinced that Brazil is going to win, but that doesn't mean that the other contenders are going to give up without a fight. Irish bookmaker Paddy Power hired Stephen Hawking to examine England's track record, and he found... that England is probably going to lose.
The Guardian describes Hawking's methodology:
To work out the conditions that suited England's football players best, Hawking (or perhaps his students) analysed 45 World Cup matches the team had played since their last tournament win in 1966. They also analyzed 204 penalties taken in penalty shoot-outs, a particular weakness for England. Hawking said the factors affecting England's performance – though surely this applies to any team – can be broken down into five areas: environmental, physiological, psychological, political and tactical.
According to the scientist, "you would be a fool to overlook Brazil," offering a simpler explanation than the one offered by Goldman: "Hosts have won over 30 percent of the World Cups." He did, however, give the English team some advice, saying members should wear red uniforms and play in a 4-3-3, rather than a 4-4-2 formation.
He also said the team should avoid high temperatures, if possible, and that "our chances of winning improve by a third when kicking off at three o'clock local time."
If the Goldman statisticians and Hawking are correct in predicting Brazil's victory, they won't be the first to correctly predict the World Cup outcome. In 2009, the late Paul the Octopus used his tentacles to successfully indicate the winning team in a number of matches. We don't know his methodology, but it seemed to work.