A test using option information as a predictor of stock index : evidence from India Market

Abstract

The purpose of this paper is to examine the prediction model developed by Bhuyan and Chaudhury (2001) on forecasting future stock index values with the data from India market. The sample pool including option and index data from February 2004 to December 2011. The hypothesis test shows that the difference between predicted index value and actual future index value is not significant. The regression results also show that the future stock index values are well explained by the prediction model.