Saxo Strats’ 2022 World Cup Predictions: Second Update Saxo Strats’ 2022 World Cup Predictions: Second Update Saxo Strats’ 2022 World Cup Predictions: Second Update

Saxo Strats’ 2022 World Cup Predictions: Second Update

Equities 8 minutes to read
Peter Garnry

Head of Saxo Strats

Summary:  The 2022 World Cup is well under way and as a result we have updated our tournament predictions based on adjusting our squad dynamic adjustment factor the Elo ratings we use in our monte carlo simulation. The new predictions show that the Netherlands is still a favourite to win the 2022 World Cup, but Portugal has climbed to the second place after two won games. In this update we also go through our thoughts behind adjusting the Elo ratings and why these adjustments have proved to be correct based on the results so far in the tournament.


Netherlands is still favourite with Portugal running second

On 18 November we published our initial predictions on the 2022 FIFA World Cup making the Netherlands the favourite to win the World Cup instead of the consensus bookmaker choice of Brazil and Argentina. As described in our initial note and in more depth here we based on our predictions on Elo ratings with five adjustment factors added and then simulated 10,000 times using monte carlo simulation. Our non-consensus predictions were met with ridicule, but as we pointed out on social media, football and also our predictions are fun and games with a grain of seriousness of course. A more important point as well, is that in order to have markets and people betting on events traders and gamblers must have predictions that diverge from consensus.

Four days later on 22 November we made our first updated predictions which had the Netherlands maintaining its role as lead favourite due to its win in the first round. Argentina’s defeat to Saudi Arabia immediately reduced their win probability to just 9% down from 22% consensus before the tournament and our 14% win probability before the tournament based on our Elo adjustments, which we elaborate on below. Our first update was short and only made available on Twitter, but in this second update we not only show the new updated probabilities, we also go into more detail on our Elo adjustments and what we have done to them since the start of the tournament.

Based on the results as of yesterday our new model simulation is still having the Netherlands as the top favourite to win the tournament, but Portugal has jumped to second place with Spain trailing at the third place. Besides Portugal seeing a big jump in its win probability, Denmark has seen a massive drop from 11% in our initial set of predictions to just 2.8% due to only getting a draw and losing one in the first two matches below well below the indicated Elo level ahead of the tournament.

Source: Saxo

Adjustments were justified

We make five adjustments to the Elo rating: Elo momentum (1-year), Misery Index, European cup win bias, shrinkage, and squad dynamics. In this second update we have only adjusted our squad dynamic factor to reflect what we have seen in the matches so far. When the group stage is done we will update the current Elo rating and the Elo momentum in addition to a new squad dynamic adjustment before we run the 10,000 simulations again. This simulation will lead to our third update and predictions for the knockout stage. Following that prediction we will update our predictions at each new round of the knockout stage until the day before the final.

As said we were criticised for our non-consensus predictions and especially our Danish bias. While the adjustment to the Danish team created a too optimistic prediction some of our other adjustments have proved to be validated. Our downward adjustments to Argentina have proved correct given the two matches and if we remove Messi, the Argentina team is quite mediocre. We also lifted Spain and Portugal in our adjustments which have proved correct. We were harsh on Belgium in our squad dynamic adjustment giving the team the largest reduction in Elo score based on this factor; this proved correct as the team has slipped from a strong outsider to a team nobody believes in. We were too tough on France due to their injuries ahead of the tournament and we have removed their penalty in the squad dynamic adjustment.

Financial Times brings today an article World Cup briefing: Ghana win shows flaws in Fifa rankings in which the authors discuss the flaws of ratings as Ghana has clearly been underestimated. This is exactly why we added a shrinkage factor to our adjustments. The shrinkage factor shrinks Elo ratings closer to the average making the teams more equal, which fit better with the high variance nature of the game. Also remember that the Elo rating convergences to the true skill level after around 30 games, but as a result of football being a high variance game the prediction error will be quite sizeable over just three matches and thus Elo ratings will over- and underestimated the true strength and weakness of teams.

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.