Customer Reviews

Modelling Financial Time Series

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The first edition was published in 1986. It is EXCELLENT.
Taylor rigorously studies the use of nonlinear
time-series (Box-Jenkins) methods to trade a variety of
financial markets, including individual stocks, stock
indices, currencies, metals, and agricultural commodities,
finding that there is a small trend component in most
markets that can be profitably traded.

Taylor performed testing of time series back in the early 1980s,
when computer power and financial data was much scarcer and more
expensive. I am excited to see what he has come up with, now that
computers and data are a zillion times cheaper.

This is a classic text in the modelling of financial time series. This book may be THE classic text in financial time series. The fact that it has been reprinted is great. In graduate school I tried to track down a copy of this book and couldn't. I am happy to have it available now. Anyone interested in financial time series should have a copy of this book on their shelf. If you are just getting started in financial time series, this is the place to start. I would recommend reading this book before reading Tsay's "Analysis of Financial Time Series". Tsay's book is oriented more as a chapter for each general topic which may not be related to the previous topic. Taylor's book has more thought focused on less topics.

If I were to limit my budget to $100 for books on financial time series, I would buy this book and Taylor's newer book "Asset Price Dynamics, Volatility, and Prediction" (a great buy at around $30) over Tsay's book.

This is (still) an excellent book, ahead of its time when published in 1986. One of the issues he dealt with was the possible modifications to option pricing models (black-scholes type) that could be made to account for trending markets. This was before the crash of '87 and the subsequent wide-spread adoption of skewed volatility smiles and risk-reversals into option pricing.

This book is probably out of print permanently, but the author is working on a new book, the provisional title of which is "Asset Price Dynamics and Prediction" Target Date of March 2004. The chapters are loosely based on subjects covered in Modelling Financial Time series.

Chapter headings for Modelling Financial Time series:

1. Introduction
2. Features of financial returns
3. Modelling price volatility
4. Forecasting standard deviations
5. The accuracy of autocorrelation estimates
6. Testing the random walk hypothesis
7. Forecasting trends in prices
8. Evidence against the efficiency of futures markets
9. Valuing options
10. Concluding remarks
Appendix : a computer program for modelling financial time series