About ASC
Analytic Systems Corp. is an economic advisory firm based out of Hopkinton, New Hampshire. John Moffatt, founder and president, has spent over 25 years in the investment industry as an institutional analyst, portfolio manager and independent consultant. In 1982, John got together with William Meisel, author of the book Computer-Oriented Approaches to pattern Recognition, who had worked on projects for the Navy and the Department of Defense. (One was of the sort made famous by Tom Clancy’s The Hunt for Red October: how to identify an enemy nuclear submarine that makes almost no sound through pattern recognition.)The two quants have developed and refined a model based on computer studies of the historical behavior of thousands of stocks and hundreds of economic time series to identify which variables and factors have the greatest impact on stock returns. Their work goes well beyond classic non-linear regression analysis as it takes into account changes in the financial environment – for example, the growing importance of currency fluctuations – and reweighs factors accordingly to reflect current realities. Analytic’s model, which looks at about 20 factors distilled from some 50 variables, first filters out what is irrelevant for an industry. Then it concentrates on significant changes in the pertinent factors, which gets rid of more “noise."
"A factor is of interest only when it moves out of its normal range,” Moffatt explains, adding that 6 to 9 factors are usually key to an industry’s and company’s economic health. A west coast money manager familiar with the firm’s work comments that Analytic “looks for abnormal security returns that reflect abnormal events, and I don’t think anyone’s doing it in economics the way John is."
None of this involves economic forecasting. The firm looks only at developments already discernible. It sends its clients a monthly newsletter of economic comment on the likely impact of current trends on markets. Moffatt’s firm goes further; it also ranks individual companies to single out those with “a significant favorable correlation to the factors that are abnormally positive.” Analytic Systems today boasts many institutional clients, each adapting the material to its own approach.
