The World Cup and Economics 2014

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27 MAY 2014 - GLOBAL INVESTMENT RESEARCH

 

Welcome to our 2014 book on the World Cup and Economics.

This is our fifth edition since the 1998 Paris competition and the first without Jim O’Neill, who pioneered the previous versions over all those years. While it is hard to match Jim’s football craziness, the group globally is still full of fans of the beautiful game. And it is now possible to acknowledge open support for teams such as Liverpool and Chelsea.

Read the full report (PDF format) or click to read these sections online:

We present this guide as a companion to the upcoming Rio Cup, with the usual unnatural mix of football and economics. We have turned again to famous guest contributors to help guide you through the competition. Franz Beckenbauer, German legend and World Cup Winner as both player and coach, talks about what it takes to succeed. Four of Chelsea’s Brazilian players – Oscar, Ramires, Willian and David Luiz – talk about the excitement and pressure of playing for the host nation. Angel Ubide of DE Shaw talks about the intersection of finance and football, looking at the impact of Spain’s crisis on the restructuring of Spanish football. And Paulo Leme, now Chair of Goldman Sachs Brazil, discusses the parallels between the economy and football in Brazil.

We also include our latest version of the World Cup Dream Team, selected by our clients from around the world. Based on the 1,700 votes submitted, Dirk Schumacher has narrowed the list down to a line-up of 11.

Alongside our regular country pages from our economists around the world, we have been busy working on beefing up our analytical capability. We have invested much more intensively this year in a model of the probability of success in a match between any two given teams, based on their track record and characteristics. Jan Hatzius, Jari Stehn and Donnie Millar use this to map probabilities of progress through the competition both game by game and to the final. Excitingly, we will be able to update the output as the game comes in. Brazil will be pleased to see it emerges as the clear favourite, helped by a home team advantage, but the likely semi-finalists are Brazil, Germany, Argentina and Spain.

Peter Oppenheimer and our Portfolio Strategy team have also looked at the links between World Cup performance and equity markets and the ‘honeymoon bounce’ that follows the winners in the weeks after the final. Yu Song and Vishal Vaibhaw look at the two missing giants – India and China – from the World Cup line-up and their hopes for the future. José Ursúa and Kamakshya Trivedi highlight some key macro trends from the history of World Cups, including disinflation in goals and the importance of land as a factor of production in World Cup victories. Seriously.

We could only wish for this level of dedication from our team around the world to their regular tasks.

We hope you enjoy the read, the World Cup and these challenging markets.

May the best team win!

Dominic Wilson and Jan Hatzius
27 May 2014

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