The Melbourne Cup, according to a well worn truism, is anyone's.
Hard to analyse, impossible to predict, and a win is based on luck rather than any clever analysis of the form.
However, if you like numbers and structure the best place to look for inspiration when it comes to picking a horse is the quants, or pointy heads, the market analysts whose lives are governed by numbers.
Each year the analysts at Macquarie look to the market to provide insights to the Melbourne Cup field. The quant team has been running the model since 2007, looking at:
- Value – cheapness, what you get for the price
- Momentum – what is working, what is getting better?
- Sentiment – what everyone is looking for right now, what people like
- Quality – what is the best, the most reliable?
- Innovative Data – what other data sources gives us an information edge
The early days saw some healthy profits but the returns have lean in recent years.
The analysts -- with limited knowledge of horse racing -- say the model is not intended to be taken seriously. It's all fun.
"Uncertainty and Volatility dominated markets since the ‘black swan’ carrying Coronavirus arrived in February," the analysts write in a note to clients.
"In terms of winning stocks, quality defensives and new economy businesses have been the clear outperformers and have strong momentum. We put more emphasis on our Odds Momentum factor and fund it from our Value factor as Value investing remains on its knees.
"The travel ban has impacted the make-up of runners with Australian visas as scarce as toilet paper in March. Last year 20 of the 24 horses came from outside of ANZ. This year that number drops to 15 from 24.
"Verry Elleegant is our top ranked horse from ANZ.
"The uncertainty of 2020 is also reflected in the lower dispersion in odds across the 24 runners compared to prior years. We instead look cross sectionally across multiple betting markets for better insights into the chances of a horse.
"Finally, this year’s race will be very distanced socially with no crowds at the track. Younger horses may have had stage fright in the past however this is a non-issue in 2020 and we ignore any age factors.
"Our preferred strategy places a bet on the top horses in our model. We also aim for the trifecta using the top quartile of horses. This best mirrors the way Quantitative strategies are applied to equity investing and can be
implemented using a ‘box trifecta’."
Or if you like the traditional tip, here's one from David Fox, CEO Ogilvy Australia:
The winner - Anthony Van Dyck.
Trifecta - Anthony Van Dyck, Verry Eellegant and Ashrun.
Best long shot - Persan for a place
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
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