Here’s the Credit Suisse quant team’s tips for the Melbourne Cup

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More Melbourne Cup tips, this time from the quant trading team at Credit Suisse.

They’re enthusiastically picking Criterion. Their picks for the trifecta:

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So with BI’s Greg McKenna (now two from two over 2013 and 2014) picking Preferment, and the quants at Macquarie plumping for Trip to Paris, we have a market.

The Credit Suisse rationale is fairly similar to the other model, but includes yield and form variables:

To produce the overall multi-factor model we standardize all of the different raw scores (shown in Figure 10) across our six factors to a consistent normal distribution using the z-score approach. We then apply a weighting structure to the five factors as follows: Age (6%), Weight (6%), Yield (22%), Quality (22%), Momentum (22%) and Form (22%), essentially suggesting that Yield, Quality, Momentum and Form should be more significant indicators of chance of success, than Age and Weight because they can both be potentially overcome by the high scores from the other factors. The final weighted average z-score is then reported in the Score column in Figure 10, which we then use to sort the horses from highest to lowest to produce our final rank.

And their full rankings for the field:

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The quants note on Criterion:

  • The shortest-priced local horse in our top quartile box trifecta is 2 Criterion ($14). It also happens to be our model’s number one ranked horse (average z-score of 0.98, next best 0.80). Whilst, as you would expect, it generally scores well across all the factors, its main drawback is its heavy-ish weight of 57.5kgs and to a lesser degree it is as yet unproven over the two mile race distance having never attempted it before (its longest win has only been over 2400m). That said it has a proven Melbourne Cup winning trainer in David Hayes (as well as Tom Dabernig), so this experience may help to offset these minor deficiencies.
  • So in addition to the trifecta, it is also hard to go past 2 Criterion for the outright win, particularly so given it additionally has a very appealing quant-style name!
  • Happy punting. Good to see the quants getting out as well.

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