Using this data, a multiple regression analysis was used to assess the effect of
ID: 3323279 • Letter: U
Question
Using this data, a multiple regression analysis was used to assess the effect of trade execution, ease of use, and range of offerings on star rating. The results of the analysis follow (see above)-
a. State the multiple regression equation.
b. Using a significance level of 1%, is there a significant relationship of star rating and the overall set of independent variables – support your answer?
c. Determine the coefficient of multiple determination and interpret its meaning.
d. Is there evidence that multicollinearity is present – support your answer?
e. Conduct an F-test, using a level of significance of 5%, to determine if ease of use has a significant effect on star rating.
Broker TradeExUse Range Rating 4.5 4.8 1 Wall St. Access 2 E*Trade (Power) 3 E*Trade (Standard) 4 Preferred Trade 5 my Track 6 TD Waterhouse 7 Brown & Co 8 Brokerage America 9 Merill Lynch Direct 10 Strong Funds 3.7 3.5 3.5 3.5 3.5 3.5 2.5 4.8 4.0 3.7 3.5 4.0 3.2 4.6 3.3 2.5 3.5 2.7 2.7 3.0 2.5 2.0 2.2 2.5Explanation / Answer
a) Rating=0.345+0.255* Tradeex+0.132* Use+0.459* Range
b) At 1% significance we have alpha=0.01
Seeing the Analysis of Variance we see that p=0.003<0.01 hence we reject the null hypothesis and conclude that there is no significant relationship between star ratings and overall set of independent variables
c) Coefficient of multiple determination= 88.6%
It shows how much variation of one variable can be explained by the other variable
d)Multicollinearity is not present
This can be seen from the values of VIF
If the values of VIF are more than 5 we can say Multicollinearity exists, but all the VIF values are less than 2
e) We see that that the F stat was 15.49 and now after removing the Use factor we got a Fstat of 23.15
The value of F stat has increased also the p value has decreased from 0.03 to 0.01 <0.05
The degrees of freedom reduced from 3 to 2
Hence we conclude that ease of use has significant effect on star rating
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