Suppose that a portfolio management firm has decided that the costs of hiring and firing managers are excessive. Which of the following would be their most appropriate course of action? The firm should: A) tolerate more Type I error to reduce Type II error. B) reduce both Type I and Type II errors. C) tolerate more Type II error to reduce Type I error.
A, i think. I believe the null is the manager adds no value. So you are more likely to keep a bad manager than you are to fire a good manager?
^ Agreed - A
Yup, a it is. If the costs to hire a new replacement for the lazy, unproductive and possibly useless manager are too great, you’ll want to hold on to him to avoid the cost of replacing his sorry… (given you’re not expecting him to blow himself or the fund up) If it’s cheap and the pickings are plentiful, install the revolving door and wait till the diamond in the rough makes it’s way through, alpha for all!
mwvt9 +1 Everytime I try to work this out my head gets dizzy. So I figure it’s easier for me to memerize the following: Type I: keep bad manager Type II: fire good manager
good job, guys. i suck at these. Your answer: B was incorrect. The correct answer was A) tolerate more Type I error to reduce Type II error. Type I error is retaining a poor manager and Type II error is firing a superior manager. If a firm wishes to reduce the costs of hiring and firing managers, then they should reduce staff turnover. So they should err on the side of retaining poor managers (Type I error) to reduce the chance of firing superior managers (Type II error). They might do this by relaxing the performance criteria managers must meet.
A
freaking McLeod cheating again. He has been doing that all night.
It’s easier that way
since both postings from mcleod and cfasf1 were time-stamped “12.45 AM” I will give mcleod the benefit of the doubt that he hit the POST key at more or less the exact same time as cfafs1 - so therefore I am prepared to reject the null that mcleod didn’t know the answer (but I accept the risk of making a type 1 error here)
i don’t know, man. that mcleod freaking knows the answer to everything… something’s fishy.
A cfasf1 go to bed, it’s late
I’m on the west coast, but you’re right, have to be up at 4:30am, should get to bed. i don’t know how mwvt and mcleod do it…
thank God for you I am on the east coast, I just don’t like sleeping
ok, i’m out. but florinpop, you need to hit the sack too, man. freaking 1am on a monday?!
Central Time Zone here, I basically hate sleeping.
I just came back from the gym so I am hyper 
it’s 3pm in Hong Kong here
Yep. same here. using behavioural trait wherein everyone thinks he/she is better than others, I remember it like Type I: Hire/keep my competitor ( or even boss)… with name Type II: fire/scold me 
unfortunately, employers are more prone to err on committing Type II error ( even though that may be costly to company in long term… but who has patience to think long term… anyways,we all are dead in long term…) cfafrank Wrote: ------------------------------------------------------- > mwvt9 +1 > > Everytime I try to work this out my head gets > dizzy. So I figure it’s easier for me to > memerize the following: > > Type I: keep bad manager > Type II: fire good manager
I think this was a difficult question.