The Signal Credibility Index for Prediction Markets: A Microstructure-Grounded Diagnostic with Weighted and Time-Varying Extensions

Prediction-market price moves are often treated as informationally equivalent despite arising from durable Bayesian updating, transient liquidity pressure, strategic position adjustment, or genuine disagreement. This paper formalizes the Signal Credibility Index as a stand-alone diagnostic. It introduces a revised persistence component on logit prices, a weighted Cobb–Douglas form with flow-based concentration, a time-varying monitoring specification, and Monte Carlo validation including out-of-distribution stress tests and a logistic-regression benchmark. The validation establishes discrimination among designed microstructure regimes, not external evidence of downstream coordination effects. The paper documents two targeted failure modes: a Type II error on informed-but-concentrated whale repricing and a Type I error on coordinated multi-wallet manipulation.