The American Association of Individual Investors (AAII) On-Line Discount Broker Survey polls members on their experiences with discount brokers. As part of the survey, members were asked to rate the quality of the speed of execution with their broker as well as provide an overall satisfaction rating for electronic trades. 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 calculating a weighted average of the scores provided by each respondent. A portion of the survey results follow. Brokerage Speed Satisfaction
Scottrade, Inc. 3.4 3.5
Charles Schwab 3.3 3.4
Fidelity Brokerage Services 3.4 3.9
TD Ameritrade 3.6 3.7
E*Trade Financial 3.2 2.9
Vanguard Brokerage Services 3.8 2.8
USAA Brokerage Services 3.8 3.6
Thinkorswim 2.6 2.6
Wells Fargo Investments 2.7 2.3
Interactive Brokers 4.0 4.0
Zecco 2.5 2.5
a. Develop an estimated regression equation using trade price and speed of execution to predict overall satisfaction with the broker. Interpret die coefficient of determination.
b. Use the F test to determine die overall significance of the relationship. What is your conclusion at the 0.05 level of significance? Use the t test to determine the significance of each independent variable? What are your conclusions at the 0.05 level of significance?
c. Interpret the estimated regression parameters. Are die relationships indicated by these estimates what you would expect?
d. Finger Lakes Investments has developed a new electronic trading system and would like to predict overall customer satisfaction assuming they can provide satisfactory 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.
e. What concerns (if any) do you have with regard to die possible responses the respondents could select on the survey.