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Math The Almighty Buck

World Cup Forecasting Challenge For Quants 111

Posted by timothy
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."
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World Cup Forecasting Challenge For Quants

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  • What's the x-bar (Score:4, Interesting)

    by Misanthrope (49269) on Monday June 07, 2010 @05:06AM (#32481684)

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

    • Re: (Score:3, Insightful)

      by Buelldozer (713671)

      My son plays competitively on a travelling team at the 11 year old level and there is one team that they frequently play who uses this tactic. It's unbelievably infuriating that they get away this bullcrap at tournament after tournament! My son's team plays ultra clean and we play 85% or more of our games without a roughness call, but when we play this other team there will be at least three against us!

      I'm a calm soccer parent, the kind that's telling the loudmouths to sit down and shut up but when we play

      • Re: (Score:1, Informative)

        by Anonymous Coward

        recreational soccer is serious business

        • "Football isn't a matter of life or death, it's much more important than that." - attributed to some UK football manager if my memory serves me correctly ;)
      • by awol (98751)

        Naah, the correct punishment is for the offender to be offered the oppurtunity to repent their acting or else the offending team is actually allowed to hurt them as much as they are acting. I reckon diving would be out of the game in a minute. Particularly if teams started picking a "specialty" player who was say 2 metres tall and 125kg with a side line in debt collecting.

    • by severoon (536737) on Monday June 07, 2010 @01:37PM (#32486190) Journal
      It's obvious to me with smart people like this behind the analysis, we should bet big on the correctness of their projections. Perhaps we should tie our economy to their analysis in some way that will potentially result in a large windfall? Who's with me?
  • Bias (Score:5, Insightful)

    by bloodhawk (813939) on Monday June 07, 2010 @05:10AM (#32481698)
    There are numerous problems here.

    Firstly is very few fans of football can truly consider themselves independent enough to do this well. I will try, but I just know my bias's will in the end have some effect on the outcome of my selections.

    Secondly it isn't just about stats at something like the world cup where there are very few second chances and It is a game where you can completely dominate the opposition and still lose to a single error or bad ref decision.
    • Re:Bias (Score:5, Funny)

      by TheKidWho (705796) on Monday June 07, 2010 @05:31AM (#32481760)

      They're Americans, they're most likely not football fans to begin with!

      • For American non-football fans, the "World" in "World Cup" means that lots of different countries from around the world participate. Different kind of "World" from "World Series Baseball" which I believe has a different interpretation of what the word means ;-)

        Sorry, couldn't resist it ;-) Hey, you're in the football world cup too, and you're not too bad at the game either!

        (yes I know it might just mean the name of a newspaper rather than a particularly limited view of how many countries there are out there

        • Major League Baseball attracts the best talent from the entire world. Japan has a Professional Baseball League, but the best players still come to the US to play in the Majors. Japanese players that come into the league are considered rookies, the same as some one coming up from Scranton AAA (minor league).

          The same could be said about the NBA or the MLH. I'm sure there are enthusiasts for Russian Hockey or Italian Basketball, but try finding results in your local paper.

          Here is my algorithm, starting wit

    • I'd be interested to know if they do any better than those who play fantasy footaball [wikipedia.org]. My guess is no.
      • Re: (Score:3, Interesting)

        Of course, the two groups (Quants & those who play (& succeed) at fantasy football) are not mutually exclusive.
      • I think you should *read* that article on fantasy football. Hint: it's not about predicting games between actual, real teams.

    • Re: (Score:3, Insightful)

      by digitig (1056110)

      Secondly it isn't just about stats at something like the world cup where there are very few second chances and It is a game where you can completely dominate the opposition and still lose to a single error or bad ref decision.

      How does that differ from what the quants usually deal with?

      • by umghhh (965931)
        On the face of it is as silly however the damage done to the real economy is much smaller if predictions do not cause collapse of economy (yes I know they are not guilty or not alone) or at least a small melt down so there is a difference albeit not the one suggested.
        • Re: (Score:3, Interesting)

          by Yetihehe (971185)
          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.
          • by Dog-Cow (21281)

            You may want to reread the book. The gold was discovered to be missing by looking at the model, not the other way around.

          • Re: (Score:3, Informative)

            by Hognoxious (631665)

            I recommend Terry Pratchett's book 'Making Money'. One "quant" essentially created a glass model of economy

            As ever, truth is stranger [wikipedia.org] than fiction. Saw it on a BBC documentary/OU program once, it's quite possible that Sir Terry saw it too. - although he probably doesn't remember...

    • Firstly is very few fans of football can truly consider themselves independent enough to do this well.

      Yeah one year where I work a French manager cleaned up in the office Aussie rules footy tipping competition using just football statistics and a copy of excel. The losers always bet their team to win.

    • Re: (Score:2, Insightful)

      by Starcub (527362)

      Secondly it isn't just about stats at something like the world cup where there are very few second chances and It is a game where you can completely dominate the opposition and still lose to a single error or bad ref decision.

      When I was in college, my buddies and I would frequently bet our money on the dog races. They published detailed stats for every race and you could compile a statistical profile of each performer. In fact, I wrote a program that attempted to predict the position of each dog in the race as the race progressed. However, what was not provided and could not be predicted is what dog would lose it's footing and go tumbling to the far rail and which part of the pack he would take with him.

      • by TheKidWho (705796)

        However, what was not provided and could not be predicted is what dog would lose it's footing and go tumbling to the far rail and which part of the pack he would take with him.

        Of course it can be predicted.

        You may not be able to, but that doesn't mean it's not possible.

        • Re: (Score:3, Funny)

          by russotto (537200)

          Of course it can be predicted.

          You may not be able to, but that doesn't mean it's not possible.

          In fact, it's easy to predict when you're the guy with the control for the remote shock-collar.

    • by eharvill (991859)

      Secondly it isn't just about stats at something like the world cup where there are very few second chances and It is a game where you can completely dominate the opposition and still lose to a single error or bad ref decision.

      This. World Cup 2002, US loses to Germany. http://news.bbc.co.uk/sport3/worldcup2002/hi/matches_wallchart/germany_v_usa/default.stm [bbc.co.uk]

      • Football is a simple game; 22 men chase a ball for 90 minutes and at the end, the Germans win.
          -Gary Lineker

    • Re:Bias (Score:5, Insightful)

      by aBaldrich (1692238) on Monday June 07, 2010 @08:23AM (#32482348)
      Here in Argentina we use to say that statistics are like miniskirts: they give you a nice idea, but hide the most important things.
      • by Anonymous Coward

        Here in Argentina we use to say that statistics are like miniskirts: they give you a nice idea, but hide the most important things.

        Like Maradona's hand?

        • by cHALiTO (101461)

          Maradona wouldn't need to hide his hand under the miniskirt, he can just openly throw his hand in, it'd just give the press more to write about ;)

      • and I predict Argentina will go far :)

  • I wouldn't put too much stock in their predictions. You know its fishy when they forecast Angola as a "team with strong fundamentals and underlying security". (I'm not even sure Angola has a team).
  • we at slashdot would appreciate it if you showed those big banks how to work properly with stats.

  • I'm sure they'll have no problem picking the winning team , look at how well they forecasted the crash of arrival of the global financial crisis..

    Oh , wait...

    • Re: (Score:1, Insightful)

      by Anonymous Coward

      You're not as clever as you think you are.

  • by Anonymous Coward on Monday June 07, 2010 @06:18AM (#32481938)

    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?

    • "Are they nothing more than professional gamblers and don't care about their responsabilities"

      Stock markets are nothing more than casinos for the more "respectable" end of the social spectrum.

    • Re: (Score:3, Insightful)

      by Hognoxious (631665)

      I mean, the financial market is still a mess and I'd rather have them working on the real issues we face.

      I'd say anything that distracts them is a good thing. Of course I'm saying that based on their previous performance, which is exactly the kind of thinking that got us into the mess.

  • For the record... (Score:5, Interesting)

    by SoVeryTired (967875) on Monday June 07, 2010 @06:29AM (#32481972)

    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 [wikipedia.org], for example.

    • Re: (Score:2, Interesting)

      by AK Marc (707885)
      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
      • by SoVeryTired (967875) on Monday June 07, 2010 @06:53AM (#32482044)

        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.

        I think that's more like a financial analyst. A quant typically works one level of abstraction away from the stock market itself, calculating prices and hedging strategies for stock options or credit default swaps, say.

        I know there's a lot of anti-quant sentiment around at the moment, and this being slashdot, I'd like to add a disclaimer: I'm just trying to describe the job that a quant does in theory. I'm not making any statement about whether the methods they use at present are effective. Please keep that in mind before flaming me.

    • Re: (Score:1, Interesting)

      by InbredTom (1189565)
      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 d
  • Stats game... (Score:3, Interesting)

    by Dicky (1327) <slash3@vmlinuz.org> on Monday June 07, 2010 @06:36AM (#32481998) Homepage

    <spam>If you think you're good at this sort of thing, you might want to join the free online prediction game I run [scorefive.com]. 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)

  • How is calculating odds for gambling/sports forecasting any different from calculating odds for gambling/the stock market?
    • by Calinous (985536)

      Because a company's bad 10 minute, or one man having a bad day, isn't usually leading to the demise of that company (things that could easily happen in sports, like overturning a 2:0 score to a 2:3 score in the last 10 minutes of a play). Or self-inflicting a goal, or taking a suspension (a red), or even colliding with a team mate (like the goalkeeper) and be taken out of the field on a stretcher.

      • Or a crooked referee.

      • by AndersOSU (873247)

        Yes and no.

        In 10 minutes a company could be responsible for a giant oil spill which causes billions worth of liability.
        In 10 days massive accounting fraud could be discovered taking down an energy trading company and a storied auditor.
        In a day the markets could realize that a investment bank that's leveraged 40:1 primarily in MBS isn't worth a 10th of what it was last week.

        etc. etc.

        The fact that banks are engaging in this challenge strikes me as an admission that their expertise is fundamentally no differen

  • Just go to Vegas or look up the current World Cup odds at any online sportsbook and it is very likely that these odds are better predictions than whatever they came up. These sportsbook odds are based on actual money bet by people who know something about sports betting instead of financial types. If these quants were actually confident that they had some sort of an edge, they would put their money where their mouths are (and affect these sportsbook odds). Of course, these sportsbook odds are also affected

  • by fuzzyfuzzyfungus (1223518) on Monday June 07, 2010 @07:11AM (#32482098) Journal
    For just $10,000 in unmarked and nonsequential bills, Vinnie "the kneecap" is willing to venture a prediction as to when any particular team is going to drop out.

    "When yous got a problem, pick Vinnie. We don't predict; we Promise."
  • 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
  • by Anonymous Coward

    Spain or Brazil - the same as the bookies. So what do the brokers say?

    Banks are using other peoples money to make money for themselves, then claiming it's all down to such highly skilled workers (what a joke).

    Brains / intelligence has NOTHING to do with the amount of money you earn. I mean am I really supposed to believe that a nurse that wipes other peoples dirty asses are worth less than a gambler? Or a surgeon that saves lives?

    Banks that use other peoples money SHOULD be paying dividends back, not cashin

  • This is a classic case where the mean crowd response is likely to have greatest predictive success - in which case just looking at global betting markets will give the most accurate prediction.
  • Are they releasing these "odds" to the public while betting against them?
  • lmao (Score:3, Insightful)

    by Alinabi (464689) on Monday June 07, 2010 @10:43AM (#32483688)
    Who knew JP Morgan had a sense of humor? I mean, England World Champions? Hilarious!
    • I think if you look at qualifying performance and squad strength, you have to give England a reasonable chance. They are still a slightly false price at 8.6 on betfair, but that is nowhere near as overbet as they usually are for international tournaments

      I wouldn't be surprised if they made it to the semis, at which point they would probably have to win two matches as slight underdogs (depending on the opposition) - not an overwhelming possibility, granted, but nowhere near hilarious; you'd have to tip someo

  • Not too new (Score:3, Informative)

    by KGBear (71109) on Monday June 07, 2010 @11:07AM (#32484038) Homepage
    15 years ago, when I was working as a Systems Analyst at a Brazilian bank that shall remain nameless, it was common knowledge that trading desks all over the country were engaging in this kind of thing. They would create "financial products" tied to World Cup statistics and use all the technology, corporate and individual knowledge at their disposal to try to predict the outcomes and win or lose huge sums of money. Individuals bet with their own money and the corporations they worked for (and who provided the infrastructure for this) tended to look the other way. One such "product" I remember well was the so-called "GDC" ("Gols Da Copa" - Cup Goals) which created a market around the total number of goals to be scored during the World Cup. I knew one trader who payed for his house with his GDC money. Most of the time it was a mostly harmless hobby (if you discount the fact that gambling is illegal in Brazil) but as the World Cup final approached, I was very aware that the resources who were supposed to be working on models of commodities, foreign exchange and other markets did little else than model the World Cup; this included both people and computational resources. I wonder if some of my old colleagues in Brazilian banking ended up finding positions in Wall St.
    • by AndersOSU (873247)

      I would think that if I were running an investment bank I would encourage my employees to engage in this sort of behavior - use company resources, but not funds. I think this sort of thing would make for remarkably good training for predicting actual financial markets. This fact is also why I think the economic utility of investment banks is wildly overstated.

  • http://bit.ly/a5OAnH [bit.ly]

    (usenet, rec.sport.soccer).

I find you lack of faith in the forth dithturbing. - Darse ("Darth") Vader

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