Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Goldman Strikes For Brazil As World Cup Kickoff Approaches

According to a report recently released by Goldman Sachs (NYSE:GS), the World Cup improves the national economic performance of the winning country.

The report predicted that Brazil (NYSEARCA:EWZ) would win this year.

Although Brazil is ranked fifth in the FIFA World Ranking, with Spain holding the number one position, the home team advantage will probably be enough for the Brazilian (NYSEARCA:BRF) team to come out on top.

The World Cup and Economics, 2014

The Goldman Sach's report entitled, "The World Cup and Economics 2014" is the fifth edition, with the first report done in the 1998 Paris World Cup event. The report was pioneered by Jim O'Neill, who was a football aficionado and a top financial advisor.

While the report has a playful element to it, reminiscent of the sport's section of a metropolitan newspaper, it is actually a statistical document based on using the stochastic model to interpret distribution.

The model is used to predict the outcomes of every one of the 64 matches in the world tournament, from the opening match between Brazil and Croatia, which starts in Sao Paulo on June 12, to the closing game in Rio de Janeiro on July 13.

Besides an accounting of what variables are used to crunch the numbers, the report also includes contributions from legendary soccer players, like German Franz Beckenbauer, and commentary from Brazil's top players about the pressure they feel playing in their home country.

Historical Commentary

Additionally, Angel Ubide, from DE Shaw, the global investment and technology firm, talks about how high finance and football work together. His article describes how the Spanish football team was restructured after Spain was impacted by the global crisis.

There is also an article by the Chair of Goldman Sachs Brazil. Paulo Leme talks about the relationship between economics and soccer in Brazil. What's more, Goldman Sach's clients from around the world cast 1,700 votes to decide on the World Cup Dream Team.

Strong Stats

The report, for the main part, consists of expert opinions on how the performance of World Cup teams affects equity markets.

Although done in a zestful spirit associated with sport's commentary, the report is actually a serious testimony to the power of statistics in measuring probabilities.

For instance, data going all the way back to 1974 showed that all stock market performances improved in the winning team's countries consistently the month after their victory--with the only exception being the Brazilian stock market in 2002 which underperformed due to a currency crisis and a deep recession.

Outlook for Brazil in 2014

This report described that the stock market of the home country of the winning soccer team tends to be 3.5 percent higher than the global average during the month after the victory.

However, these results don't last for more than three months, and a year later the country that won the World Cup will be 4 percent below the global average.

Investors might consider a short-term long play on the Brazilian ETF , which has already shown strength, likely in anticipation of the June 12 kickoff.

(Nasdaq.com)

Long-term, Brazil is in a period of subdued expansion, with some analysts believing the economy will grow by no more than 2% in 2014 and 2015.

Given consistent volatility and difficulty in extracting very clear data and projections in this arena, we suggest the 'Brazil' play for aggressive fans only.

(http://ishares.com/us/products/239612/ishares-msci-brazil-capped-etf)

Readers wishing to join the discussion on Brazil and other emerging markets to click the +FOLLOW button above the title of this article and follow @DRDInvestments on twitter.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Stocks: BRF, GS, EWZ