I once had run my own prediction of the FIFA World Cup. I used elo ratings from http://eloratings.net/Europe http://eloratings.net/Europe which i converted into

I once had run my own prediction of the FIFA World Cup. I used elo ratings from http://eloratings.net/Europe http://eloratings.net/Europe which i converted into a model giving probabilities for any outcome between two teams. For each group A-F and for each possible pair of teams (a,b) in that group, i estimated the probability for them to qualify in that order using monte carlo simulation. Doing this explicitly should reduce overall estimation variance. Using that data i calculated the probaility for each team to become world champion using exact formulas. The results looked reasonable to me. What i have learned was, that the chances of extreme outsiders typically are extremly over estimated by the book makers. I have checked this paper for comparison (Table 8) and think the results are in line with my observation. I remember vaguely having heard, that there is a similar observation for stock options, which are extremly out of the money, there are typically much too expensive to buy. The bottom line is, never to bet on Korea or Japan getting FIFA world champion :-)