Graduation Year

2026

Date of Submission

4-2026

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Ben Gillen

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

@ 2026 Ellis R Delvecchio

Abstract

This paper examines whether informed traders participate in Kalshi Mentions prediction markets, how they influence price discovery, and where their activity concentrates. Using a panel of over 2,000 settled contracts observed at eleven volume-percentage horizons, I construct an abnormal trade size (ATS) measure to detect non-liquidity-driven order flow and test its relationship to contract outcomes, price dynamics, and calibration.

Elevated ATS significantly predicts contract outcomes in logistic regressions controlling for price, volume, spread, and category fixed effects, with predictive power that strengthens as contracts approach resolution. This pattern is consistent with the Kyle (1985) model of gradual, strategic information revelation. ATS spikes are also temporally persistent, with a 73.5% transition probability across consecutive horizons, and a follow-the-leader strategy entering contracts at mid-life horizons generates positive net returns after transaction costs, indicating that informed price impact has not yet been fully arbitraged away.

Calibration analysis reveals a pronounced long-shot bias in uninformed contracts, mirroring the findings of Snowberg and Wolfers (2010). In contracts with informed trader activity, this bias is substantially reduced and reverses sign at high price levels, providing evidence that informed order flow serves a corrective function. Together, the results show that informed trading in Kalshi Mentions markets is real, detectable, and improves price accuracy, while simultaneously imposing adverse selection costs on uninformed participants.

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