Timing Stock Market Using Real Variables

How is it possible to successfully time the stock market using publicly available information if the market prices evolve according to a random walk in a rational market? Our paper answers this question by providing nine strategies to time the S&P500 index, using two specific real variables as indicators. The explanation for why our strategies are successful is because macroeconomic persistence makes the two real variables anticipate future economic activity “better” than S&P500; they create additional value in timing the market as the changes in stock prices reflect subsequent changes in real activity in a rational market