The American Association of Individual Investors (AAII) On-Line Discount Broker

Question

The American Association of Individual Investors (AAII) On-Line Discount Broker Survey polls members on their experiences with electronic trades handled by discount brokers. As part of the survey, members were asked to rate their satisfaction with the trade price and the speed of execution, as well as provide an overall satisfaction rating. Possible responses (scores) were no opinion (0), unsatisfied (1), somewhat satisfied (2), satisfied (3), and very satisfied (4). For each broker summary scores were computed by computing a weighted average of the scores provided by each respondent. A portion the survey results follows (AAII website, February 7, 2012)

Round your answers to three decimal places. Enter negative values as negative numbers.

a. Develop an estimated regression equation using trade price and speed of execution to predict overall satisfaction with the broker.

The regression equation is

Satisfaction Electronic Trades = ____ + ____ Trade Price + ____ Speed of Execution

b. Finger Lakes Investments has developed a new electronic trading system and would like to predict overall customer satisfaction assuming they can provide satisfactory levels of service levels (3) for both trade price and speed of execution. Use the estimated repression equation developed in part (a) to predict overall satisfaction level for Finger Lakes Investments if they can achieve these performance levels.

_____

c. Develop a 95% confidence interval estimate of the overall satisfaction of electronic trades for all brokers that provide satisfactory levels of service for both trade price and speed of execution.
____________ to ____________

Satisfaction Trade Speed of Electronic Brokerage Price Execution Trades Scottrade, Inc. 3.5 3.4 3.4 Charles Schwab 3.2 3.3 3.4 Fidelity Brokerage Services 3.1 3.4 3.9 TD Ameritrade 3.6 3.7 E Trade Financial 3.2 2.9 3.2 (Not listed) 2.5 2.7 2.6 Vanguard Brokerage Services 3.8 2.8 USAA Brokerage Services 2.4 3.8 3.6 2.6 2.6 2.6 Think orswi Wells Fargo Investments 2.3 2.7 2.3 Interactive Brokers 3.7 4.0 4.0 Zecco.com 2.5 2.5 2.5 Firstrade Securities 3.0 3.0 4.0 Banc of America Investment Services 4.0 1.0 2.0

Explanation / Answer

solution:

Preformed Regression in Exccel

y=satsifaction electronic trades

x1=trade price

x2=speed of execution

y~x1+x2

SATISFACTION ELECTRONIC TRADES=-0.783+0.558(TRADE PRICE)+0.734(SPEED OF EXECUTION)

sOLUTIONB:

given trade price=3

speed of execution=3

substitute in regression equation to get

SATISFACTION ELECTRONIC TRADES=-0.783+0.558(TRADE PRICE)+0.734(SPEED OF EXECUTION)

   =-0.783+0.558(3)+0.734(3)

=3.093

=3.1

Rounding to one decimalsas given in data for satisfaction one decimal point

overall satisfaction level for Finger Lakes Investments=3.1

SolutionC:

For trade price

lower 95%=0.045

upper 95%=1.071

0.045 to 1.071

For

speed of execution.

lower 95% CI=0.391

upper 95%CI=1.077

0.391 to 1.077

SUMMARY OUTPUT Regression Statistics Multiple R 0.826272314 R Square 0.682725937 Adjusted R Square 0.625039744 Standard Error 0.410845374 Observations 14 ANOVA df SS MS F Significance F Regression 2 3.995409718 1.997705 11.83517 0.001811 Residual 11 1.856733139 0.168794 Total 13 5.852142857 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Intercept -0.783476184 0.942278832 -0.83147 0.42339 -2.85742 1.290466 TRADE PRICE 0.557957136 0.23317013 2.392919 0.035677 0.044753 1.071161 SPEED OF EXECUTION 0.734175363 0.155738212 4.714163 0.000635 0.391398 1.076953

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.