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Are there any books or compilation of research papers that discuss application of ARIMA models to forecast prices in financial markets I.e stocks,commodities,futures,options etc.

I found this one but was hoping for some more examples: http://softcomp.ee.ntou.edu.tw/publications/conference/arima_nn.pdf

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    $\begingroup$ Nice paper, except they don't tell us how much money they made. Maybe because they didn't make any. $\endgroup$ – Aksakal Jan 3 '15 at 23:49
  • $\begingroup$ Take a look at Nobel prize 2013 announcement, also watch a very accessible video of a lecture by Fama $\endgroup$ – Aksakal Jan 4 '15 at 1:03
  • $\begingroup$ @Aksakal Even if possible, may not be exploitable either! ;-) nbs.rs/export/sites/default/internet/latinica/90/90_9/… $\endgroup$ – Graeme Walsh Jan 4 '15 at 3:24
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    $\begingroup$ Random walk model with drift is one of the accurate models for predicting stock prices. If you have the data, you could test this out. Looking fig 5 and 6, I can say that random walk + drift would have been accurate than the NN model proposed. $\endgroup$ – forecaster Jan 9 '15 at 21:02
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The closest you'll get is probably one of Ruey S. Tsay's books; for example, Analysis of Financial Time Series. This books covers ARIMA models in Chapter 2 and then goes on to discuss other, arguably more appropriate, models for modelling financial time-series.

As noted in the comments by the reference to the work of Eugene Fama, predicting stock prices is a difficult endeavor, so it's not likely to find any book, let alone one focusing solely on ARIMA models, telling you the grand secret! Even it claimed to do so, you'd be wise to exercise some caution.

That said, you may find the literature on momentum trading strategies of interest. For example, see this recent paper Currency Momentum Strategies by Lukas Menkhoff, Lucio Sarno, Maik Schmeling, and Andreas Schrimpf. And, if I'm not mistaken, the seminal paper in this area of finance is a 1993 Journal of Finance paper Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency by Jegadeesh and Titman.

The standard sort of textbook on options and other financial instruments that's used at Universities is the John C. Hull book Options, Futures, and Other Derivatives. I don't recall the book covering ARIMA models directly, but it did touch upon ARCH and GARCH models as well as the EWMA (exponentially weighted moving average) model. Obviously, the book provides details of how to price various options via the famous Black–Scholes formula and variations of it, but it would be difficult to imagine seeing how to implement use of that in a practical setting - the setting you probably have in mind. Nevertheless, it may be worth knowing about since you mentioned options and futures.

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  • $\begingroup$ Thanks a lot. I started with Ruey Tsay's book but gave up after a few pages. I will come back to it after I have some more knowledge on the topic. $\endgroup$ – Victor Jan 5 '15 at 15:38
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    $\begingroup$ No problem. Might be useful to go through Rob Hyndman's online forecasting book before tackling Tsay again. Could be a case of just getting to grips with the notation - can look scary, but stick with it and it should make sense. $\endgroup$ – Graeme Walsh Jan 5 '15 at 15:44

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