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Tue, 22 Jan 2008
Thoughts on the Eve of CFA I Results
On 01 December 2007, I took the CFA Level I exam. The results for this exam will be made available tomorrow (23 January 2008), but before I find out how I did, I think it might be useful to you and a good exercise for me to describe my thoughts on the exam, the process, and my self-assessment of how I did. First, a word of background. I am untrained in finance and economics in any formal sense. On the job as a venture capital analyst and associate for the past two years, I have learned modeling and DCF, and have also picked up a strong interest in reading macroeconomic blogs and news (e.g. The Economist, Calculated Risk). However, VC is not a "finance-heavy" branch of finance, as most of the risk we look to assess is more human and "soft" in nature, such as management and market risk. I never took economics, finance, or economics in school, although I did run bookkeeping for a couple of startup companies I ran (accrual accounting, double-entry bookkeeping). So the content of CFA I was largely new to me, though the generalities of finance were not. In general, I am very smart and a good test-taker. For example, I aced the SATs (on my second try), several College Board and AP exams, and most of my International Baccalaureate exams. But I studied like a mofo for those, and those (roughly 11 years ago) were the last time I took any standardized tests. In college, my record was significantly less stellar (for too many reasons to list here). However, CFA I claims you need 250 hours of prep. It boasts a 40% pass rate. Nearly all of the takers (so far as I can tell) come from the finance industry and/or economics or finance academic backgrounds. So I figured (then and now) that it's anyone's game: me, the solid test-taker, against CFA I, the exam whose pride depends upon trouncing 60% of comers despite their being specialists. So, I set out in June / July 2007 to begin studying for CFA I. I bought both the "official" curriculum (several hundred $$), about 12" thick of books, and the "Schweser" third-party, "Cliff's Notes"-style curriculum, which was perhaps 7" or 8" thick. I started out powering through the CFA books, but quickly, upon advice of friends and upon realizing the difference in concision, switched to using the Schweser exclusively. I got busy with a lot of work stuff and really didn't put much, if any, time into test prep in July-September 2007. Maybe 1 hour a week. Then, in October, I really picked things up, and started putting in 4-5 hours a week. Finally, in November, I rededicated myself to the effort, making flash cards, carrying books with me to lunch each day, and adopting a mantra of "study every day, test (practice tests) every weekend." I probably did an average of 15 hours per week during November 2007, starting at 10 hours and moving to 20 hours for the last couple weeks (2 hours a day for 6 days + 8 hours on Saturday). All in all, I'd estimate time spent: Nov 2007 4.3 weeks @ 15 hrs / week = 64.5 Oct 2007 4.3 weeks @ 5 hrs / week = 21.5 July-Sept 2007 13 weeks @ 1 hrs / week = 13 --- Total = 99 hrs In the last two weeks, I was scoring between 68% and 78% on the Schweser practice exams. (Two runs closer to 68%, the final "outlier" being closer to 78%.) Part of this may have been a discrepancy in the difficulty between the Schweser "sample" vs. "practice" exams; I think that the "practice" exams may be a bit harder to make the "sample" ones, and the real thing, seem easier. On exam day, I showed up with a good amount of fresh fruits, complex carbos, caffeine and nicotine, and lots of fresh pencils and two TI BA-II+ calculators. I did not get a good night's sleep before; much of that was probably stress (both CFA I and exogenous, career- and personal-oriented stress). On the morning half, I finished the exam once through with about an hour left to spare. I spent 35-40 minutes going over my answers and changed perhaps 10% of my answers from their prior values. (You're stuck in the room for the final 30 minutes if you haven't bailed before then; I napped at my desk.) On the afternoon half, I finished with just over an hour left. I reviewed my answers and changed maybe 5% of the values, but realized that I was "bonking" -- getting somewhat tired and low-blood-sugar, I was in danger of making corrections worse than the originals. So I called it with 45 minutes left, and drove home to Seattle through an incipient snowstorm to party it up with some old friends (including a CFA II candidate). Overall, I left the exam center confident that I did at least as well on the exams as I had on my practice / sample runs. Given what folks had been posting on Analyst Forum, I think high 60s would probably be a safe pass. Considering that my low-end practice runs were already there, and that I left feeling I did at least that well, I would wager, perhaps laying 4:1, that I passed. The one area I have some serious apprehension about would be with respect to the particulars of filling in the bubbles. Perhaps it was my 11 year hiatus, but in the afternoon session I recalled filling in some bubbles or such (not answers, just pro forma stuff) that I didn't remember from the morning. I'm hoping that it was a false memory, a true difference in the AM / PM test forms, or something not tabulated for scoring. But given the anal nature of standardized tests, who knows. Also, there were some rocky sections in the vagaries of financial statement analysis (there are lots of traps and tricks with e.g lease capitalization and LIFO COGS) and ethics. Bad showings in those two areas could have really knocked me down a few notches, perhaps enough to fail. So, there you have it: the story of one man's CFA I attempt. Will my superior test-taking history compensate for only having done 40% of the recommended hours of study? Will my senile old-man's mistake of filling in the wrong test center number or such disqualify my entire AM session? And will those whippersnappers with their recent finance degrees outfox me, leaving me in the dust? Stay tuned. (I promised myself a new motorcycle if I passed, so if you do stay tuned, you may get to hear another "product review" in short order...) Update: I passed. Multiple Choice Q# Topic Max Pts <=50% 51%-70% >70% - Alternative Assets 12 - * - - Derivatives 12 - * - - Economics 24 - - * - Equity Analysis 24 - - * - Ethical & Professional Stnds. 36 - - * - Financial Statement Analysis 68 - - * - Fixed Income Analysis 24 - - * - General Portfolio Management 12 - - * - Quantitative Analysis 28 - - * Thanks to the CFA Society of Seattle for a scholarship and to Voyager Capital for picking up expenses. $Id: thoughts_on_cfa_i_results_eve.txt 1061 2008-01-23 18:26:44Z rlucas $ [category: /finance] [permalink] |
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