Rugby World Cup

GLOBAL

The Macquarie Quant Guide

Always bet on black: New Zealand to go back-to-back
The attention of the Rugby loving world will shift to the United Kingdom over the
next 6 weeks as the 20 best teams in the world fight it out in the 8th official Rugby
World Cup. We warm up for this years Melbourne Cup by building a Quant
model to forecast the outcome.
New Zealand is impossible to go past this year and is our favoured team to
take out the title. This will be a history making effort for the All Blacks as no team
has won back-to back World Cups before.

Inside
A Quant guide to the Rugby World Cup

A prediction for every match

Building the model

Model Results: Country by country

The match schedule and forecasts

The odds for New Zealand to take out the crown are already narrow therefore
we run a full simulation of the tournament allowing our model to pick the
outcome of each match.

Group standings and the finals

Final thoughts

The final sees New Zealand plotted against England on the 31st of October at
Twickenham, London. The home ground advantage just isnt quite enough to get
England over the line.
Australia finish 3rd on the numbers and are unfortunately drawn in the same
pool as England. This means they finish second in the pool which results in a
showdown with the All Blacks in the semi-finals. A potential bogey game for the
Kiwis and wed be happy for our model to get this one wrong!
South Africa appears to be the biggest disappointment driven by their form
over the last 12 months. They finished last in the recent Rugby Championship.
They are welcoming back a wealth of experience for the World Cup but are
facing an uphill battle to be serious competitors in 2015.
France and Ireland should win their fare share of games in the tournament and
will benefit from playing close to home. Wales will provide stiff competition but
are in a very difficult group with England and Australia more likely to advance.

Getting Quanty with William Web Ellis

In similar vein to our prior work on the Melbourne Cup and the Football World
Cup in Brazil we transform traditional stats from the sport (in this case rugby) into
Quant factors to create a model for the Web Ellis trophy. The pillars of our
model are:
Value:

World Ranking, World Cup Matches

Momentum:

Change in Ranking, Win % (Last 12m)

Sentiment:

Odds, Change in Odds

Quality:

Best Result, Point Differential (12m), World Cup Points

Other:

Home Ground Advantage

We must stress that the purpose of this model is for fun. Our equity models
incorporate years of research internally and from external sources such as
academia. The world cup model has been put together by a lone team member
in their spare time. Enjoy the rugby!
16 September 2015

Please refer to page 9 for important disclosures and analyst certification, or on our website
www.macquarie.com/research/disclosures.

Macquarie Wealth Management

Rugby World Cup

A Quant guide to the Rugby World Cup

Building models for Macquarie Style
We transform Rugby
stats to build a
model for the World
Cup

This is not the first time weve taken a quant approach to sport see for example our
catalogue of reports forecasting Australias famous Melbourne Cup horse race: (2014, 2013,
2012 and more) and last years Football World Cup in Brazil. These forecasts do not come
without pedigree; Macquaries Melbourne Cup model has generated some good
performances and the Football World Cup model successfully picked Germany to win last
year.
We follow in these footsteps and take the same approach here: we use quantitative investing
principles to build a model to rank each countrys World Cup chances, and then use that
model to forecast tournament results.

Focussing on William Web Ellis

With Australia having a proud Rugby tradition, we thought this years World Cup (Web Ellis
Trophy) would be a good warm up for the Melbourne cup. There are clear favourites in this
competition and we will tend to prefer these teams as our model is data driven. Many would
argue a lot of the teams are simply making up the numbers. The players in these teams
would strongly disagree and will be focussed on causing an upset. With this in mind, we
highlight 10 interesting rugby facts before getting into the nuts and bolts of the model.

Some interesting
facts for the
upcoming
tournament

1.

World Cup upsets do occur.... some of the more infamous include Ireland upsetting
Australia 15 to 6 in the 2011 group stage. Or who could forget Frances upset of
New Zealand in the semi-final in 1999. They were given no hope and trailed 24-10
only to turn it on for 20 minutes and score 33 points. They followed it up again in
2007 beating the Kiwis 20-18 in the quarter final.

2.

Can the Kiwis overcome their Northern Hemisphere blues? New Zealand has never
reached a Rugby World Cup Final in the Northern Hemisphere.

3.

On the other hand, the Australians seem to enjoy getting above the equator having
won two World Cups in the Northern Hemisphere.

4.

The only nations to host and win a tournament are New Zealand (1987, 2011) and
South Africa (1995).

5.

A defending champion has never won the World Cup. Can New Zealand create
history and be the first team to win two in a row?

6.

145 is the most points that have ever been scored against a team at a World Cup.
New Zealand gave a rugby lesson to Japan in 1995. The widest winning margin in a
World Cup match is 142, achieved by Australia against Namibia in 2003.

7.

The first international rugby match was between Scotland and England in 1871 at
Raeburn Park in Edinburgh. Scotland won 1-0 by converting a try.

8.

The reigning rugby Olympic champion is the USA! 1924 was the last time rugby was
played at the Olympics in Paris. The United States is the most successful nation
winning gold in 1920 and 1924 as well as being the current Olympic champion.
Rugby sevens will make an appearance in the 2016 Rio Olympics.

9.

The same whistle, the Gil Evans whistle, is used to kick off the opening game of
every Rugby World Cup tournament. It was first used by Gil Evans, a Welsh referee
in 1905 and was also used at the kick off of the final rugby match at the 1924 Paris
Olympics.

10. A try was originally worth no points! Under the initial rules the only way to score was
by kicking a goal. A try simply gave the team the right to do a place kick for points.
Hence, it gave them a try for goal.

16 September 2015

Macquarie Wealth Management

Rugby World Cup

Building the model

The pillars of quant
We use our
traditional pillars of
building models for
equities

Quant factors are the building blocks of quant styles, and styles are combined into models.
For example, our Macquarie Alpha Model has over 120 factors that are grouped into 10 styles
which are then weighted to form a single model rank (see the report). For our World Cup
model we will take a similar approach, using the 5 most important quant styles:
1.

Value cheapness, what you get for the price

2.

Momentum what is working, what is getting better

3.

Sentiment what everyone is looking for right now, what people like

4.

Quality what is the best, the most reliable

5.

Other/Innovative Data what no-one else using, what I know that others dont

Altogether we have 10 factors across these 5 styles with no factor making up more than 20%
of the model weight providing diversification.
Value
1.

The World Rugby Rankings provides a quantitative measure to rank international

teams across the globe. The system ranks teams on their recent performances and
weights the results depending on the significance of the game and quality of the
opposition.

2.

World Cup matches: We look through the history of the prior World Cups and find
which countries have had the most matches.

Momentum
1.

Change in world ranking: We look at what the world ranking (described above) was
6 months ago and compare it to today. Those nations moving up the rankings will be
in better form and more dangerous.

2.

Similar to above, we simply take a nations winning percentage over the last 12
months. This does not account for the quality of the opposition but is still quite
indicative of the form.

Sentiment
1.

Betting odds. The bookmakers are the best guide to what the consensus views the
chances of each nation are. We incorporate up-to-date odds from Bet 365.

2.

Change in odds: In our quant models, we look at changes in sentiment as there is

often persistence in these changes. Here we focus on those teams where the
sentiment is shifting over the last 6 months.

Quality
1.

Winning a World Cup is a huge achievement and requires incredible focus and
calmness under pressure. We look at each countrys history at the World Cup and
give a higher score to those who have performed on the big stage before.

2.

Winning and losing does not tell the entire story. By looking at the for-and-against
record for the last 12 months, we determine how convincingly the teams have been
winning or losing.

3.

World Cup Points: A teams ability to score enough points can be rewarded in this
tournament with bonus points available in the group stages. We look at the history of
total points scored in World Cups for each country.

Other Data
1.

16 September 2015

Home ground advantage can make a big difference, especially in the Northern
Hemisphere with parochial crowds lifting the home team to another level. We think
this will benefit European teams over teams from other regions in the world.

Macquarie Wealth Management

Rugby World Cup

Factor and style weighting

Diversification is a
key to Quant
investing so we
spread the weights
across the model

Diversification is key to quant, and with a distinct lack of historical data we go very close to
the simplest (but also sometimes the best) weighting scheme for our styles: equal weighted.
We allocate 25% each to Value, Momentum, Sentiment, with Quality and Other Data making
up the remaining 25%. The underlying factors making up the styles are weighted based on
their anticipated impact. We delved deep into the quant teams knowledge base to find an
expert in this space and came up empty. Thankfully there were many diehard fans in the
broader group to provide some qualitative advice as to which factors are more impactful to
the outcome of a match.
The weightings are shown at the top of the table on the next page. Once the model is built
we can then plug and play and see how we think the tournament will pan out.

16 September 2015

Macquarie Wealth Management

Rugby World Cup

Model Results: Country by country

New Zealand scores top marks in the model and are deserved favourites going into the
tournament. Their form and the fact that this tournament will mark the end of careers of some
of their finest ever players means they will be up to the challenge.

Model rankings
are shown
below!

The home ground advantage sees England slot firmly into second place. The pressure will
be on! We see the home ground advantage as a benefit but some may argue they will choke
under the pressure.

New Zealand
leads the way

Australia is ranked third and was building nicely until their recent match with New Zealand.
Consistency and their ability to execute under pressure will be the key for Wallabies.
Of the Europeans France, Wales and Ireland all look like they can make some noise this
year too.
South Africa is the surprise disappointment in the model following their form slump in 2015.
They are welcoming back a number of key players to the team for the tournament but lack of
match time makes them a risky proposition.

Fig 1 Team rankings and the model inputs

Value
25%

Quant Factor
Weight

Momentum
25%

Sentiment
25%

Quality
20%

Other Data
5%

World
Ranking

World Cup
Matches

Change in
Ranking

Win %
(last 12m )

Odds

Change in
Odds (6m )

Best Result
in WC

For and
Against (12m )

World Cup
Points

Hom e Region
(Europe)

Factor within Style

75%

25%

50%

50%

75%

25%

50%

20%

30%

100%

Model Weight (factor wt * style wt)

19%

6%

13%

13%

19%

6%

10%

4%

6%

5%

100%

100%

45%

100%

100%

80%

100%

100%

100%

0%

85%

85%

55%

85%

95%

35%

100%

75%

85%

100%

95%

90%

95%

40%

85%

75%

100%

45%

95%

0%

70%

100%

80%

60%

75%

85%

75%

60%

90%

100%

80%

75%

75%

85%

70%

15%

50%

65%

70%

100%

75%

70%

35%

95%

80%

90%

10%

90%

65%

100%

90%

60%

10%

35%

90%

5%

100%

30%

80%

0%

55%

80%

65%

20%

60%

100%

50%

35%

75%

100%

65%

70%

60%

45%

65%

70%

50%

40%

60%

0%

60%

50%

85%

70%

50%

70%

10%

60%

50%

0%

50%

25%

70%

95%

50%

70%

0%

70%

30%

0%

40%

50%

5%

85%

35%

95%

0%

95%

35%

0%

45%

50%

50%

30%

60%

10%

10%

25%

55%

0%

20%

50%

40%

65%

15%

70%

0%

80%

25%

100%
0%

Input for Factor

New Zealand
England
Australia
France
Wales
Ireland
South Africa
Scotland
Argentina
Fiji
Tonga
Japan
Samoa
Romania
Namibia
USA
Italy
Georgia
Canada
Uruguay

5%

15%

100%

60%

15%

70%

0%

85%

15%

30%

25%

90%

25%

30%

70%

0%

10%

20%

0%

35%

50%

15%

5%

50%

20%

0%

5%

40%

100%

25%

10%

20%

50%

30%

30%

0%

50%

15%

100%

15%

55%

25%

10%

30%

30%

10%

15%

45%

0%

10%

5%

30%

15%

15%

70%

0%

20%

5%

0%

Final
Ranking

87%
82%
78%
77%
71%
69%
59%
59%
56%
54%
50%
40%
39%
37%
33%
33%
30%
29%
22%
16%

Each column for each country shows their total possible score out of 100%
Source: Macquarie Research, bet365.com.au, September 2015.

Now that we have the model, the next step is to apply it to the tournament!!

16 September 2015

Macquarie Wealth Management

Rugby World Cup

The match schedule and forecasts

We can forecast the
winner of each
match scheduled for
the tournament

We apply our model simply and equally to all matches:

The team with the highest rank wins (4 points).
If the team model scores are within 15% then a bonus point is added to the loser as we

expect a close match (1 point).

If the team model scores are greater than 25% than a bonus point is added to the winner

as they are more likely to score more than 4 tries (1 point).

Fig 2 The Pool matches and the model results

Date
18-Sep-15
19-Sep-15
19-Sep-15
19-Sep-15
19-Sep-15
20-Sep-15
20-Sep-15
20-Sep-15
23-Sep-15
23-Sep-15
23-Sep-15
24-Sep-15
25-Sep-15
26-Sep-15
26-Sep-15
26-Sep-15
27-Sep-15
27-Sep-15
27-Sep-15
29-Sep-15
1-Oct-15
1-Oct-15
2-Oct-15
3-Oct-15
3-Oct-15
3-Oct-15
4-Oct-15
4-Oct-15
6-Oct-15
6-Oct-15
7-Oct-15
7-Oct-15
9-Oct-15
10-Oct-15
10-Oct-15
10-Oct-15
11-Oct-15
11-Oct-15
11-Oct-15
11-Oct-15

Match Pool
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

A
C
D
B
D
B
A
C
B
A
D
C
C
D
B
A
A
B
B
C
A
D
C
B
B
A
C
B
D
A
B
C
C
B
A
A
C
D
D
B

Team A
England
Tonga
Ireland
South Africa
France
Samoa
Wales
New Zealand
Scotland
Australia
France
New Zealand
Argentina
Italy
South Africa
England
Australia
Scotland
Ireland
Tonga
Wales
France
New Zealand
Samoa
South Africa
England
Argentina
Ireland
Canada
Fiji
South Africa
Namibia
New Zealand
Samoa
Australia
England
Argentina
Italy
France
USA

Model Rating
82%
50%
69%
59%
77%
39%
71%
87%
59%
78%
77%
87%
56%
30%
59%
82%
78%
59%
69%
50%
71%
77%
87%
39%
59%
82%
56%
69%
22%
54%
59%
33%
87%
39%
78%
82%
56%
30%
77%
33%

Model Rating
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v

54%
29%
22%
40%
30%
33%
16%
56%
40%
54%
37%
33%
29%
22%
39%
71%
16%
33%
37%
33%
54%
22%
29%
40%
59%
78%
50%
30%
37%
16%
33%
29%
50%
59%
71%
16%
33%
37%
69%
40%

Team B Location

Time

Winner?

Fiji
Georgia
Canada
Japan
Italy
USA
Uruguay
Argentina
Japan
Fiji
Romania
Namibia
Georgia
Canada
Samoa
Wales
Uruguay
USA
Romania
Namibia
Fiji
Canada
Georgia
Japan
Scotland
Australia
Tonga
Italy
Romania
Uruguay
USA
Georgia
Tonga
Scotland
Wales
Uruguay
Namibia
Romania
Ireland
Japan

21:00
13:00
15:30
17:45
21:00
13:00
15:30
17:45
15:30
17:45
21:00
21:00
17:45
15:30
17:45
21:00
13:00
15:30
17:45
17:45
17:45
21:00
21:00
15:30
17:45
21:00
15:30
17:45
17:45
21:00
17:45
21:00
21:00
15:30
17:45
21:00
13:00
15:30
17:45
21:00

England
Tonga
Ireland
South Africa
France
Samoa
Wales
New Zealand
Scotland
Australia
France
New Zealand
Argentina
Italy
South Africa
England
Australia
Scotland
Ireland
Tonga
Wales
France
New Zealand
Japan
South Africa
England
Argentina
Ireland
Romania
Fiji
South Africa
Namibia
New Zealand
Scotland
Australia
England
Argentina
Romania
France
Japan

Twickenham, London
Kingsholm Stadium, Gloucester
Millennium Stadium, Cardiff
Brighton Community Centre, Brighton
Twickenham, London
Brighton Community Centre, Brighton
Millennium Stadium, Cardiff
Wembley Stadium, London
Kingsholm Stadium, Gloucester
Millennium Stadium, Cardiff
Olympic Stadium, London
Olympic Stadium, London
Kingsholm Stadium, Gloucester
Elland Road, Leeds
Villa Park, Birmingham
Twickenham, London
Villa Park, Birmingham
Elland Road, Leeds
Wembley Stadium, London
Sandy Park, Exeter
Millennium Stadium, Cardiff
Stadium MK, Milton Keynes
Millennium Stadium, Cardiff
Stadium MK, Milton Keynes
St James' Park, Newcastle
Twickenham, London
Leicester City Stadium, Leicester
Olympic Stadium, London
Leicester City Stadium, Leicester
Stadium MK, Milton Keynes
Olympic Stadium, London
Sandy Park, Exeter
St James' Park, Newcastle
St James' Park, Newcastle
Twickenham, London
Manchester City Stadium
Leicester City Stadium, Leicester
Sandy Park, Exeter
Millennium Stadium, Cardiff
Kingsholm Stadium, Gloucester

Bonus Point Bonus Point

Lose < 7 Score > 4 tries
England
Ireland
France
USA
Wales
New Zealand

France
New Zealand
Argentina
Canada
Wales
Australia
Scotland
Ireland

France
New Zealand
Japan
Scotland
Australia
Tonga
Ireland
Romania
Fiji
South Africa
Georgia
New Zealand
Wales
England
Romania
Ireland
Japan

Source: Macquarie Research, September 2015.

16 September 2015

Macquarie Wealth Management

Rugby World Cup

Group standings and the finals

Final group standings

The result of the

pool matches is
shown below

Our simulation results in the following standings after all of the pool matches. England tops
Group A with a close win over Australia. This proves critical for them being able to advance
past the semi-finals as they avoid a clash with New Zealand earlier than the final.
If the results go the way we anticipate South Africa, New Zealand and Australia will be in the
top bracket. England appears to have the friendlier run into the finals if they can top Group A.
The winner of Group D (we have France pipping Ireland) should have a much easier path to
the semi finals.

Fig 3 Final standings of the Pools

Group A
England
Australia
Wales
Fiji
Uruguay

Group B
South Africa
Scotland
Japan
Samoa
USA

Group C
New Zealand
Argentina
Tonga
Namibia
Georgia

Group D
France
Ireland
Romania

Italy
Canada

Played
4
4
4
4
4

Win
4
3
2
1
0

Loss
0
1
2
3
4

Draw
0
0
0
0
0

Bonus PointsFinal Points

2
18
2
14
3
11
1
5
0
0

Played
4
4
4
4
4

Win
4
3
2
1
0

Loss
0
1
2
3
4

Draw
0
0
0
0
0

Bonus PointsFinal Points

1
17
2
14
2
10
0
4
1
1

Played
4
4
4
4
4

Win
4
3
2
1
0

Loss
0
1
2
3
4

Draw
0
0
0
0
0

Bonus PointsFinal Points

4
20
1
13
1
9
0
4
1
1

Played
4
4
4
4
4

Win
4
3
2
1
0

Loss
0
1
2
3
4

Draw
0
0
0
0
0

Bonus PointsFinal Points

3
19
4
16
2
10
0
4
1
1

Source: Macquarie Quantitative Research, September 2015

And the winner is.... New Zealand

We can now
simulate the finals
bracket

We map out the finals bracket below continuing to use our ranking system. New Zealand
comes out on top

Fig 4 The Pool matches and the model results

Saturday, 17 October 2015
Quarter Final 1
South Africa
41
Australia
Quarter Final 2
New Zealand
42
Ireland

Sunday, 18 October 2015

Quarter Final 3
France
43
Argentina
Quarter Final 4
England
44
Scotland

59%
78%

Saturday, 24 October 2015

Semi Final 1
Australia
45
New Zealand

78%
87%

87%
69%

Saturday, 31 October 2015

Rugby World Cup Final

New Zealand
England

87%
82%

Friday, 30 October 2015

3rd and 4th playoff
Australia
47
France

78%
77%

48
77%
56%

82%
59%

Sunday, 25 October 2015

Semi Final 2
France
46
England

77%
82%

Source: Macquarie Research, September 2015.

16 September 2015

Macquarie Wealth Management

Rugby World Cup

Final thoughts
So that its for the 2015 World Cup. We cant go past the favourites for this tournament but
England look well placed to give the Kiwis a run for their money.
As we stated on the front page, the purpose of this model is mostly fun. We are trying our
best to pick the winner but this is definitely not our area of expertise. Our equity models
incorporate years of research internally and from external sources such as academia. The
World Cup model has been put together by a lone team member in their spare time.
Enjoy the rugby!

16 September 2015

Macquarie Wealth Management

Important disclosures:

Rugby World Cup

Recommendation definitions

Volatility index definition*

Financial definitions

Macquarie - Australia/New Zealand

Outperform return >3% in excess of benchmark return
Neutral return within 3% of benchmark return
Underperform return >3% below benchmark return

This is calculated from the volatility of historical

price movements.

All "Adjusted" data items have had the following

adjustments made:
Added back: goodwill amortisation, provision for
catastrophe reserves, IFRS derivatives & hedging,
IFRS impairments & IFRS interest expense
Excluded: non recurring items, asset revals, property
revals, appraisal value uplift, preference dividends &
minority interests

Benchmark return is determined by long term nominal

GDP growth plus 12 month forward market dividend
yield
Macquarie Asia/Europe
Outperform expected return >+10%
Neutral expected return from -10% to +10%
Underperform expected return <-10%
Macquarie First South - South Africa
Outperform expected return >+10%
Neutral expected return from -10% to +10%
Underperform expected return <-10%
Macquarie - Canada
Outperform return >5% in excess of benchmark return
Neutral return within 5% of benchmark return
Underperform return >5% below benchmark return
Macquarie - USA
Outperform (Buy) return >5% in excess of Russell
3000 index return
Neutral (Hold) return within 5% of Russell 3000 index
return
Underperform (Sell) return >5% below Russell 3000
index return

Very highhighest risk Stock should be

expected to move up or down 60100% in a year
investors should be aware this stock is highly
speculative.
High stock should be expected to move up or
down at least 4060% in a year investors should
be aware this stock could be speculative.
Medium stock should be expected to move up
or down at least 3040% in a year.
Lowmedium stock should be expected to
move up or down at least 2530% in a year.
Low stock should be expected to move up or
down at least 1525% in a year.
* Applicable to Asia/Australian/NZ/Canada stocks
only

EPS = adjusted net profit / efpowa*

ROA = adjusted ebit / average total assets
ROA Banks/Insurance = adjusted net profit /average
total assets
ROE = adjusted net profit / average shareholders funds
Gross cashflow = adjusted net profit + depreciation
*equivalent fully paid ordinary weighted average
number of shares
All Reported numbers for Australian/NZ listed stocks
are modelled under IFRS (International Financial
Reporting Standards).

Recommendations 12 months
Note: Quant recommendations may differ from
Fundamental Analyst recommendations

Recommendation proportions For quarter ending 30 June 2015

Outperform
Neutral
Underperform

AU/NZ
46.23%
37.67%
16.10%

Asia
58.36%
25.65%
15.99%

RSA
47.27%
29.09%
23.64%

USA
44.20%
49.29%
6.52%

CA
60.65%
34.19%
5.16%

EUR
43.01% (for US coverage by MCUSA, 9.68% of stocks followed are investment banking clients)
40.93% (for US coverage by MCUSA, 5.53% of stocks followed are investment banking clients)
16.06% (for US coverage by MCUSA, 1.38% of stocks followed are investment banking clients)

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16 September 2015