“accurate forecasts lose money until you bet the proper way”
Classical theory ties forecasting accuracy to trading profit, but only for automated market makers; on central limit order book exchanges, informed forecasters routinely lose money while uninformed heuristics profit. The authors prove a formal equivalence that works in both settings: for any strictly proper scoring rule, a "proper betting" strategy depending only on your prediction and the market price earns positive expected profit whenever your forecast beats the price, and it is essentially the only strategy with such a robust guarantee. Across thousands of AI model forecasts, proper betting is the only strategy that reliably converts accuracy into profit, with optimal play varying by forecasting persona. A month-long live deployment on Kalshi returned +80.33% with a Sharpe ratio of 3.35.
Extensive technical background assumed
Platforms mentioned: Kalshi