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World Cup Forecasting Challenge For Quants

Posted by timothy on from the kickoff-in-four-days dept.

databuff writes "As a break from projecting the strength of subprime mortgages, credit default swaps, and other obscure financial instruments, quantitative analysts at Goldman Sachs, JP Morgan, UBS, and Danske Bank have modeled the 2010 FIFA World Cup. Now Kaggle has set up a forecasting competition, allowing statisticians to go head-to-head with these corporate giants. The challenge is to predict how far each country will progress in the tournament."

10 of 111 comments (clear)

  1. What's the x-bar by Misanthrope · · Score: 3, Interesting

    For somebody falling to the ground clutching their leg long enough to get a card thrown?

  2. Don't they have other things to do? by Anonymous Coward · · Score: 3, Interesting

    I mean, the financial market is still a mess and I'd rather have them working on the real issues we face. Or is this a quick glance at what actually always goes on at those companies? Are they nothing more than professional gamblers and don't care about their responsabilities?

  3. For the record... by SoVeryTired · · Score: 5, Interesting

    For the record, quants rarely try to predict things in the market. That's left to people who work in econometrics. The main job that a quant does is to price financial instruments in a way that is consistent with the market prices of other liquidly traded assets. I'm being deliberately vague about what precisely is meant by "consistent" because that often depends on the choice of model, but there are also model-free results which require certain asset prices to obey certain relations: put-call parity, for example.

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    1. Re:For the record... by AK+Marc · · Score: 1, Interesting

      For the record, quants rarely try to predict things in the market.

      I'm not sure the distinction you are using. Quants predict nothing. They are used to see which companies appear undervalued, and thus would be good values (and not in the sense of a value vs growth company). They are also used to determine which appear overpriced. Then, if you hold shares in an overvalued stock, you sell it and buy the undervalued one. Of course, Google has perpetually be "overvalued" even while rising in value greatly, and many companies with troubles have been "undervalued" while their stock dropped.

      But it's true that quants are never used to "predict" anything like a specific target price. They are used as an indicator to the relative valuation of a stock based on numerical data to determine whether it is expected to go up or down in value in the future. But then, that sounds a lot like a prediction, even though everyone working with them will say they don't predict anything. Or, to more plainly state my opinion on the matter and your statement, they don't actually predict anything, but they are often used in order to predict things.

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    2. Re:For the record... by InbredTom · · Score: 1, Interesting
      Just to furnish your comment with some more detail. Quants calculate the risks attached to financial instruments. So they can tell you, statistically, what losses may be incurred on an asset in a given time frame or how you should hedge the risks attached to a complex financial security with simpler, more liquid securities. Now, of course quants can't predict the future, but they can (or at least should be able to) prepare you for future eventualities by assigning future eventualities with a probabilistic distribution.

      So quants are well accustomed to considering future events, designing models of the future and identifying critical factors that future outcomes are particularly sensitive to. So by considering future dependencies and what-if scenarios, and then attempting to measuring these outcomes, quants are well qualified to model what may happen in the world cup. Now we know there is major unpredictability in sport--this is particularly true for football (soccer), and more so in a cup-format tournament--so much like their analysis of CDOs and other funky products, don't be surprised to discover they are all wrong!

      Just my tuppence worth.

  4. Re:Considering how well they did in the past... by royallthefourth · · Score: 4, Interesting

    Worse than that, JP Morgan picked Slovenia to finish fourth. Ahead of teams like Germany and Slovenia.

    ...that's basically how credit default swaps work.

  5. Stats game... by Dicky · · Score: 2, Interesting

    <spam>If you think you're good at this sort of thing, you might want to join the free online prediction game I run. There's a US$50k prize up for grabs, if you're better than these guys...</spam>

    (Yeah it's spammy, but check my account ID - it's not like I just signed up recently or anything)

    --
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  6. Markov Chain Monte Carlo Online WorldCup Simulator by dcmouser · · Score: 2, Interesting

    I've written an online Markov Chain Monte Carlo simulator where people can experiment with pairwise team predictions in order to not just predict tournament winners, but more interestingly, to evaluate the most profitable expected payoffs from current betting odds (which are almost never the most likely teams to win). The page goes into the statistical basis of Markov Chain Monte Carlo (MCMC) quite a bit, and the simulation is all done client-side using javascript. Might be interesting for those who like this kind of stuff. http://www.donationcoder.com/wcp

  7. Re:Bias by Yetihehe · · Score: 2, Interesting

    I recommend Terry Pratchett's book 'Making Money'. One "quant" essentially created a glass model of economy which was so good, that he moved some money by manually moving liquids inside. It looks like our quants are beginning to have such influence on current economy.

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  8. Re:Bias by adamofgreyskull · · Score: 2, Interesting

    Of course, the two groups (Quants & those who play (& succeed) at fantasy football) are not mutually exclusive.