Fed Reserve Research Paper States Prediction Markets Hold Significant Analytical Value

Odaily According to a latest research paper published by Federal Reserve researchers, prediction markets have been highly praised for their role in economic analysis, with the prediction platform Kalshi specifically mentioned and studied for its performance.

The report points out that Kalshi's predictions regarding the federal funds rate and the U.S. Consumer Price Index (CPI) statistically outperformed federal funds futures and professional economist forecasts. It also provides continuously updated complete probability distributions, rather than traditional intermittent point forecasts.

The study also suggests that prediction markets offer unique market-based distribution data for areas such as GDP growth, core inflation, unemployment rate, and non-farm payrolls. These variables previously lacked comparable market pricing tools. Since 2022, Kalshi's predictions for Federal Reserve interest rate meeting outcomes have been entirely consistent with the actual results.

The report notes that a major advantage of prediction markets lies in the participation of retail investors, distinguishing them from traditional financial markets dominated by institutions. This gives them unique value in information aggregation and real-time reflection of market expectations.