The predictions made by UBS's calculation programs for the World Cup have proved unreliable. Nevertheless, the bank is likely to win this game in the long run.
France and Croatia in the final: This turn of events in the World Cup surprised not only football fans, but also the algorithms of the big banks, which cost millions. Goldman Sachs let their smart software play through the tournament 1 million times - and saw Brazil play France. The calculations of Switzerland's UBS gave Germany and Brazil the best chances of a World Cup victory.
But despite the use of powerful computers, things turned out differently than the banks thought. Football once again proved to be proverbially unpredictable.
367 Million Words Combed
This however does not prevent the institutions from letting their programs rummage through new «big data» mountains. According to the industry portal Business Insider (behind paywall), UBS has now examined the quarterly results presentations of all companies listed on the U.S. blue chip index S&P 500 over the last seven years. Among 367 million words, the big bank's computers searched for a certain pattern. Namely, whether the share prices react positively to a change of mood in the company presentations.
The pattern is obviously valid - and what the machines spat out is this: The U.S. stock exchange will receive a strong boost during the upcoming reporting season.
Icing on the Cake
If the forecast comes true, the makers of the UBS «Evidence Lab» can look forward to great success. The UBS laboratory brings together data-driven analyses on all kinds of topics.
If, on the other hand, the machines are wrong – as they were at the World Cup – this is not bad from the bank's point of view. The lab's analyses are designed to provide additional information that promises customers added value beyond the «usual» fundamental analysis.
The new machine knowledge is, at least for the moment, the icing on the research cake. Only, investors have to ask themselves whether they want to bet on the bank's predictions.
