Harnessing LLMs for Temporal Data - A Study on Explainable Financial Time Series Forecasting

Applying machine learning to financial time series has been an active area of industrial research enabling innovation in market insights, risk management, strategic decision-making, and policy formation. This paper explores the novel use of Large Language Models (LLMs) for explainable financial time series forecasting, addressing challenges in cross-sequence reasoning, multi-modal data integration, and result interpretation that are inherent in traditional approaches. Focusing on NASDAQ-100 stocks, we utilize public historical stock data, company metadata, and economic/financial news. Our experiments employ GPT-4 for zero-shot/few-shot inference and Open LLaMA for instruction-based fine-tuning. The study demonstrates LLMs' ability to generate well-reasoned decisions by leveraging cross-sequence information and extracting insights from text and price time series. We show that our LLM-based approach outperforms classic ARMA-GARCH and gradient-boosting tree models. Furthermore, fine-tuned public LLMs, such as Open-LLaMA, can generate reasonable and explainable forecasts, although they underperform compared to GPT-4.