Goldman Sachs have created an epic model to determine who'll win Euro 2016

Photo by Shaun Botterill/Getty Images

The 2016 European Football (Soccer) Championships gets underway in France later this week, kicking off a month-long extravaganza for football lovers around the world.

The bookmakers favour the home nation, France, to lift the trophy at the Stade de France in the final on July 10, with World Champions Germany, and current holders Spain, completing the second and third lines of betting respectively.

Mirroring the view expressed by punters, the Goldman Sachs economic team, led by Jan Hatzius, also favour France for the title, attaching a 23% probability that Les Bleus will lift the trophy, based on their modeling.

Here’s the mechanics of the model used to formulate its call.

First, we estimate a regression model to predict the number of goals scored by a particular team (“team i”) against a particular opponent (“team j”) using the entire history of mandatory international matches since 1958, when the first European championship was played (a total of 4,719 matches). Following the literature on predicting football matches, we assume that the number of goals scored by team i is described by a so-called Poisson distribution and explained by the following statistical factors:

  • 1. The difference in team performance as reflected in Elo ratings prior to the match. The Elo system was originally devised to rank chess players. It is a composite measure of national football team success that evolves depending on a team’s results and the strength of its opponents.
  • 2. The number of goals scored by team i in the last 10 competitive matches.
  • 3. The number of goals conceded by team j in the last 2 competitive matches.
  • 4. A home dummy.
  • 5. A Euro Cup dummy to capture whether a team does systematically better at Euro Cups than in other competitive matches.
  • Past performances, recent goal scoring form, the number of goals conceded, home ground advantage and the performance of the team in prior European championships, in other words.

    That last point doesn’t bode well for perennial big tournament underachievers, England, installed as fourth favourites by Goldman at 11% to lift the cup.

    Based on Goldman’s modeling, the bank has released the probability of each team reaching various stages of the tournament, ranging from the start of the knockout phases all the way through to the tournament’s conclusion.

    The detail can be found below.

    Goldman’s suggest that a probabilistic model, rather than a forecast model, is more useful for predicting the outcome of football tournaments.

    It also admits that while statistics can go a long way to determining who’s likely to feature in the pointy-end of the tournament, there are other factors that need to be considered.

    “On the plus side, our approach carefully considers the stochastic nature of the tournament using statistical methods, and we do think that the Elo rating—the most important input into our analysis—is a compelling summary of a team’s track record,” says Goldman.

    “On the minus side, we ignore a number of potentially important factors that are difficult to summarize statistically, including the quality of the individual players unless they are reflected in the team’s recent track record. And there is no room for human judgment.”

    So should you part with you hard-earned cash to back Goldman’s call? If the 2014 World Cup was anything to go by, perhaps it’d be best to wait until the knockout stages of the tournament when the bank will release its updated model forecasts.

    “First, performance in the group stage was not great. The model only identified 9 of the 16 advancing teams and failed to predict the elimination of heavyweights Spain and Italy, although it correctly anticipated that England would fly home early,” admits Goldman.


    “The fully updated version of the model — that is, the projection we sent out before each day of play on the basis of updated Elo ratings and other performance measures — was remarkably accurate during the knockout stage.

    “It correctly predicted the winner of every match except the 7-1 semifinal between Germany and Brazil. But that was, by one estimate, the single most surprising result in World Cup history.”

    The tournament gets underway on Friday, June 10 (Saturday June 11 at 5am AEST), with host nation France taking on Romania.

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