According to curriculum:
"A return distribution of skilled managers that is highly distinct from the return distribution of unskilled managers:
-> high opportunity cost of not hiring the skilled managers" (NB: so, this would be a Type II)
“The smaller the difference in sample size and distribution mean and the wider the dispersion of the distributions, the smaller the expected cost of the Type I or Type II error.
More- efficient markets are likely to exhibit smaller differences in the distributions of skilled and unskilled managers-> lower opportunity cost of retaining unskilled manager and lower the cost of hiring an unskilled manager.”
Isn´t this a contradiction? Shouldn´t the rule be:
Wide dispersion (high differences skilled vs unskilled) -> high cost of Type I or II
Narrow distribution (low differences skilled vs unskilled) -> low cost of Type I or II