Paul the octopus outsmarts banking's brightest quants

Paul the octopus outsmarts banking's brightest quants

Quants at Goldman Sachs, JP Morgan, Danske Bank and UBS who tried to predict the outcome of the football World Cup have been comprehensively outperformed by German TV sensation, Paul the psychic octopus.

Paul recorded a perfect eight out of eight for his predictions during the tournament in South Africa. He backed Germany to beat Australia, Ghana, England, Argentina and Uruguay, but lose to Serbia and Spain, who he then predicted would win the final against the Netherlands.

The oracle octopus has now retired although, according to the Daily Telegraph, a Spanish businessman has offered the Sea Life aquarium in Oberhausen EUR38,000 for him.

In contrast to Paul, the finest minds at some of the world's largest investment banks failed to predict the World Cup outcome. JP Morgan backed England to win, while Goldman Sachs, Danske Bank and UBS all opted for Brazil.

To be fair, Paul's psychic powers were only tested on a game-by-game basis, giving him a 50% chance of opening the correct mussel-filled national jar on each occasion.

It wasn't only cephalopods that got the better of the banks. Kaggle, a site that runs competitions for statisticians and data professionals, challenged its users to come up with a winning model.

In total, 65 teams participated in the Take on the Quants challenge, with JP Morgan finishing 28th, Goldman Sachs 33rd, UBS 55th and Danske Bank 64th. The betting markets fared better, finishing 16th.

Australian economist Thomas Mahony came first, with his strategy correctly tipping Spain to win, the Netherlands to finish second and Germany to finish in the top four.

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