A City financial analyst who has predicted the winners of the last two football World Cups has forecast that England will make it to the final in Qatar in December.
With an econometric model developed in 2014, crossing FIFA ranking points and the results of a University of Nottingham economic study published in 2022 that showed certain economic and climatic variables can predict success in international football matches, including GDP per capita, population size and temperature, analyst Joachim Klement at Liberum worked out that Gareth Southgate’s team will lose to Argentina in the final.
Stressing the importance of his research, the strategy, accounting and sustainability analyst noted that research by behavioural economists has found that even the US stock market underperforms 3.9% during FIFA World Cups.
He also pointed to research in the Journal of Finance, the world’s most prestigious finance journal that showed that if a country loses in the knockout stage of a World Cup, the local stock market in that country experiences an abnormal loss of 0.49% the next day.
Furthermore, studies of eight different stock markets from London to Madrid and Montevideo indicated that results of the national football team at the World Cup do influence the returns of the local stock market, with markets performing better after victories and worse after losses.
“Because investors are distracted by football matches, markets tend to drift lower during the tournament, but if a team wins, the enthusiasm this victory creates makes investors more risk seeking and pushes up prices the next day,” explains Klement.
“Meanwhile, if a team loses, investors are more risk averse (or simply hungover) the next day and take fewer risks, thus creating additional downward pressure on prices.”
England getting to the final would therefore provide at least four or five boosts to London stocks through the group and knockout stages, before a big damp squib if Klement’s model continues its perfect record.
With predictions of victories for Germany and France in the past two World Cups giving him a 100% track record so far, Klement noted that he and his econometric model had far out-predicted Goldman Sachs (NYSE:GS) (which wrongly predicted Brazil for 2014 and 2018 tournaments), UBS (Brazil and Germany) and ING (Spain both times), as well as Nomura and Macquarie, who got one out of two.
“Based on this statistically significant sample of two, we are confident that we have the world’s best model to predict the World Cup,” Klement said in a tongue-in-cheek note to clients.
“So far, our model has been infallible and what could possibly go wrong if we use it to forecast the third World Cup in a row?”
Focusing on his predicted semi-finals, Klement says Spain versus Argentina “doesn’t have the same ring to it as Brazil vs Argentina, but football World Cups are not WWE shows with pre-scripted outcomes.”
The model predicts that Argentina will beat Spain 3-2 in extra time.
“Don’t ask why, they just do,” the analyst says.
In the other semi-final the Three Lions face Portugal and a “narrow victory” sends the Northern Europeans through to the final on 18 December, providing four days for the British and Argentinian press to trawl through the 40 years since the Falklands War, memories of the 1966 loss the South American country knows as “the theft of the century” and the “hand of God” goal in the 1986 semi-final.
With Argentina forecast to prevail, Klement concludes that it will mean that: “Messi will win something that Ronaldo never has and Argentina will celebrate its first World Cup win in 36 years.”