With the advent of FIFA World Cup 2018, the zeal to predict who is going to be the winner has also gained momentum. From the famous Paul the Octopus in the past to latest Hermitage Cat Achilles and two-year old polar bear Nika, all have entertained us with their oracle duties.

Well, some big investment banks have also jumped into this prediction game but they are quite behind from these innocent animals. However, it is a double whammy for those who love both market and football.

How They Generate Predictions

Both UBS and Goldman Sachs had predicted the same in 2014 but failed.

UBS this year presented a model, which was explained in a comprehensive 17 page long research paper along with colorful facts about the host country Russia and its growth potential for an investor. They used 10,000 simulations and 18 analysts to forecast that Germany would win.  

On the other hand, Goldman used a combination of algorithms and big data to calculate the winner. They used 1,000,000 simulations to predict. Their prediction was Brazil would lift the trophy. However, the prediction was same in 2014 also.

What Actually Happened

Surprisingly, both the teams didn’t make it even to the semi-finals of World Cup 2018. Germany returned home at the primary stage, from the group league stage. After Brazil’s defeat by Belgium, Goldman predicted that Belgium would take the trophy home as it has 32.6% chance of winning according to their simulation results.

Goldman re-ran the simulations and made a forecast that the final would be between Belgium and England and again was proved wrong.

What You Can Learn From It

The banks made huge effort and made predictions on the Match Day but failed. Mere algorithm fell short of predicting human performance on the field. So is market behavior which not just runs on facts and figures but a lot of human emotion, thought process, and above all, greed and fear drive it.

Even Warren Buffett, the ‘Oracle of Omaha’ cannot say what will happen next day in the share market. He can only anticipate with his experience and knowledge and stay prepared for it. Research, expertise, fundamental knowledge and experience are the key to stay afloat in the market. Do not pay heed to short term noise made by entities similar to banks or institutions and jump to conclusions.

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