Economists predict who will win the World Cup

Just like they forecast economic variables, and even asset prices, economists are now trying to predict who will win the World Cup. For example, professional services network PricewaterhouseCoopers (PwC) uses an econometric model to estimate the relative strength of each country participating in the World Cup.

They find that Brazil is the strongest team - and therefore most likely to win the tournament. Nearly half of Brazil’s strength is explained by home advantage, which turns out to be an important factor in other similar studies as well. In fact, there are several teams who have better form (recent performance) than Brazil in PwC’s model.

The Economist adopts a very different approach: Rather than concentrate on overall strength, they look at “the result of every competitive international game since 1993 to analyze the relationship between a team’s chances of winning a match and the relative difference between the sides’ FIFA world rankings at that time,” also taking into consideration home advantage.

Investment bank Goldman Sachs uses a combination of the two approaches, integrating current form and historic World Cup performances into The Economist’s methodology. Goldman’s competitor, Deutsche Bank, proxies for talent as well by throwing a nation’s number of players in the best European leagues into the mix.

All three models conclude that Brazil is the team most likely to win the World Cup. However, while Goldman gives them a 49 percent chance, the Economist puts their odds at 21 percent. At 12 percent, Deutsche has the least confidence in Brazil. These statistical models cannot measure current form, injuries or other recent developments, but we can depend on markets for those. Twenty-one British betting companies aggregated by The Economist put Brazil’s chances at 34 percent.

In fact, I saw only two institutions not favoring Brazil: Computer game company EA is favoring Germany, while CIES Football Observatory, based in Switzerland, predicts that Spain will beat Brazil in the final. I am not sure whether they would like to stick to their call, after the reigning champions got humiliated by Holland on June 13.

The other models have similar shortcomings. For one thing, all of them have the Spaniards reaching the semifinals, whereas football commentators are now questioning whether they will even be able to reach past the group stage. Spain’s bookmaker odds fell over the weekend. Meanwhile, Costa Rica, who thrashed Uruguay on June 14, had been seen as the underling in the “Group of Death.”

The problem with statistical models is that football, at least the non-American variety, is less predictable than most other sports. Anyone following the NBA could have foreseen that the finals would be played between San Antonio and Miami. In my opinion, it is this unpredictability that makes football so beautiful.

I honestly don’t know who will lift the trophy on July 13. But I would not be surprised if it is not Brazil. After all, according to The Numbers Game, a book about football statistics, about half of winning a game depends on nothing but luck.