Experts are no match for the crowd? Study: Market inflation predictions are surprisingly more accurate than Wall Street analysts

Kalshi establishes research division and points out that prediction markets significantly outperform Wall Street analysts in US inflation forecasts, especially during high volatility periods, demonstrating lower errors and indicating a move toward institutional-level applications.

Kalshi today announced the formation of a research division and released a report stating that market traders’ predictions of US inflation data are not only more accurate than Wall Street analysts but also show up to 50% error advantages during intense market fluctuations, heralding the mainstream and institutional adoption of prediction markets.

Kalshi Research marks the entry of prediction markets into academic and corporate perspectives

Kalshi announced the creation of a new academic research division, Kalshi Research, similar to the research departments of OpenAI and Anthropic, which will provide global researchers with the largest volume and highest quality prediction market data and platform information.

At the same time, Kalshi will host its inaugural prediction market conference, aiming to gather researchers, predictors, traders, and community members to showcase the latest discoveries in economic models, behavioral finance, and market structure.

Officially, scholars from Harvard, Stanford, Yale, and the University of Chicago have signed cooperation agreements with Kalshi. Previously, partners included Phantom, Coinbase, CNN, Google Finance, and Grok AI, which integrated front-end or data to become collaborators.

Kalshi Research: Wall Street’s “Inflation Data” Predictions Less Accurate Than Prediction Markets

Kalshi Research’s first internal study publicly compared CPI prediction errors over 25 months, showing that Kalshi’s predictions had an average error 40% lower than Wall Street consensus. A week prior, 85% of predictions matched or were more accurate than consensus:

Prediction market prices continuously update before events occur, reflecting real market sentiment and information absorption rates, giving it a natural advantage in high-sensitivity data like inflation.

Additionally, during “shock” scenarios where inflation deviates significantly from expectations, the accuracy advantage of prediction markets becomes even more apparent.

When Kalshi’s CPI predictions differ from Wall Street by more than 0.1 percentage points, the probability of significant deviation reaches 80%, far higher than the previous baseline of 40%. More importantly, during these high-uncertainty periods, Kalshi’s average error is 50% lower than professional analysts.

Three traders outperform one institutional analyst? “Crowd wisdom” is key

The team pointed out that, unlike institutional analysts relying on specific models, prediction markets consist of thousands of traders motivated by profit, betting from different perspectives based on industry information, data, and economic signals, leading to faster information aggregation: “This kind of ‘crowd wisdom with financial incentives’ is the key to leadership.”

Moreover, Wall Street analysts often face reputation and systemic pressures, preventing overly aggressive forecasts; market traders, driven solely by profit, make real-time adjustments when data shifts, resulting in outcomes closer to reality.

Prediction markets as institutional decision support tools

As Kalshi completed a $11 billion valuation funding round this month, and Polymarket’s valuation is rumored to reach $15 billion, prediction markets are attracting unprecedented capital, research, and user growth.

The research concludes that prediction markets will not replace traditional models but serve as an important supplement for policymakers, risk teams, and asset management institutions during periods of high uncertainty. They can play a role in inflation, elections, and geopolitical events.

• This article is reprinted with permission from：《Chain News》
• Original title：《Kalshi Research: Prediction Markets “Inflation Forecast Accuracy” Outperforms Wall Street Analysts》
• Original author：Crumax