Increasing Numbers of Consumer Contracts Contain Arbitration Clauses in Which

question 31

Essay

Increasing numbers of consumer contracts contain arbitration clauses in which the consumer agrees in advance that any dispute related to the contract will be submitted to an arbitrator,often chosen by the other party to the contract.Agreements between consumers and insurance companies,as well as agreements between stockbrokers and their clients,are two areas where these are increasingly common.What are the advantages and disadvantages to the consumer of such a clause? Should these clauses be effective to allow consumers to give up their rights to use the court system? Does it affect your analysis if you learn that many consumers are not aware of these provisions or do not understand them when they enter into these agreements? How enforceable should these mandatory arbitration clauses be?

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Definitions:

Residual Standard Deviation

A measure of the amount of variance in a dataset or predictive model not explained by the model itself.

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 is more volatile than the market.

Information Ratio

A measure of portfolio returns beyond the returns of a benchmark, typically used to assess the skill of a portfolio manager.

Residual Standard Deviation

A measure of the amount of variability or dispersion for individual data points in a regression model that cannot be explained by the predictive equation.