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Showing posts with label CFA. Show all posts
Showing posts with label CFA. Show all posts

A Favorite Student Nails It

I just heard that one of my favorite undergrads (yes, I do have favorites) just accepted a job offer at a major banking firms (one o0f the ten largest in the country). He's an interesting profile: a so-so GPA (just south of 3.0), that was mostly due being an engineering major his first year and a half before switching to finance. But, he comes across as much better than his GPA - he's really passionate about finance, was president of our local FMA student chapter, and is a heck of a nice guy.

He somehow managed to get an internship at the bank this summer, and totally nailed it. That wasn't surprising, because he always did FAR more work in class than I asked, and always asked for more. He just got the offer (and accepted it ) today, and came into my office to tell me about it about 10 minutes ago. It was a pretty good one - mid 50s , a couple thousand signing bonus, and great benefits.

It just goes to show that internships matter - a lot. After he graduates, he'll be working in a temporary slot at the firm for six months until his training program starts. So, he figures it'll be a good time to knock out the CFA Level 1 exam (did I mention he really likes finance and isn't afraid of extra work?)
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Rocky Balboa and The CFA

I came across analystforum while studying for the Level 1 exam of the CFA. It's a fantastic resource - they have forums for all 3 level, people who pass the various levels continue to post in the forums long after they've passed. If you're taking the exams, sign up - it's free, and worth it's weight in gold.

Results for the CFA exams were just announced, and a number of people who seemed to be locks for passing ended up failing. For others, it was not the first time failing at the exam (I've heard that the average time to completion is 5 years, which means most people that complete the people fail 2+ exams along the way).

In any event, people on the forum were consoling and encouraging those who failed, and one of them linked to a bit of dialog on the movie Rocky Balboa (one of my all-time favorite pictures). It may be the best talk I've ever heard a father give his son:
"Let me tell you something you already know. The world ain't all sunshine and rainbows. It's a very mean and nasty place, and I don't care how tough you are. It will beat you to your knees and keep you there permanently if you let it. You, me or nobody is gonna hit as hard as life.

But it ain't about how hard you hit. It's about how hard you can get hit and keep movin forward. It's about how much you can take and keep movin forward.

That's how winning is done.

Now if you know what you're worth, then go out and get what you're worth. But you gotta be willing to take the hits and not be pointing fingers and saying 'it's because of him, or her, or anybody'. Cowards do that, and that ain't you. You're better than that. "
Of course, it's much better with a South Philly accent.


Now go rent the movie, and watch it with your kids.
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CFA Level 2 Results

I finally got to the CFA Institute Website for my Level 2 results - of course, the server was overloaded for the first half hour after results were made available. Once again, it wasn't pretty, but I passed. CFAI only gives a very broad idea as to how candidates scored, but based on their report, I scored above 70% on approximately 60% of the material, between 50% and 70% on 25% of the material, and below 50% on the remaining 15% of the material.

But who cares? I passed.

So for now, it's back to research. Here's what's on my plate:
  • Finish two papers that are somewhere between initial results and finished manuscript. They WILL be done by mid-September to submit to a conference. On one, I'm the data guy. On the other, I'll probably do the initial draft.
  • Do the final edits on a paper that's previously been rejected and reworked. It should be done by next week to send out to yet another journal
  • Finish updating the data set to add another 5 years of data for another paper that was rejected, then redo all the analyses. I get to play "data monkey" on this one too, and my coauthor gets to do the rewrite.
I also have a syllabus to write for my new MBA class. I taught it once before, but that was years ago. This'll be the first time teaching MBA since 2001, so it should be fun.
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It's CFA Level 2 and Level 3 Results Day

Today is the day they give out results for the Level 2 and Level 3 CFA exams. Looks like pass rates for the Levels 2 and 3 exams were lower than their historical levels.

To all who passed, congratulations - you're now one step closer to finishing the process. If not, here's some perspective from the "Godfather of the Analyst Forum" (he goes by the pseudonym of "Joey DeVivre"). It was geared towards the Level 1 Exam, but it fits for L2 and L3 as well:
If You Failed
1) You are in distinguished company
I know a college finance professor who took 7 tries to pass three exams. This guy even wrote a college textbook on corporate finance. (That sounds like an apocryphal story, but I swear it's true but there is no way I'm posting his name).

2) Nobody will care
Everybody seems to have this dread that something terrible will happen when they tell their colleagues, boss, significant other, and parents. What will happen is they will say "Wow, hard test. When are you taking it again?"

3) You will be 6 months older when you get your charter.
I was in my late 30's so most of you will be at least ten years ahead of me when you get it even if you fail a few times.

4) You will get a solid foundation to build on for the next two levels
Learning this stuff again means you will learn it better, deeper, and more committed to long-term learning. This will pay dividends over the next couple of exams.

5) You failed a really hard exam
Every year the pass rate is less than 50%. In that >50% who fail number are oodles of smart people who studied hard. There is a ton of material on this exam and you have a career and a life outside of this exam. It's a bear and you don't even need an excuse for failing.

And to those who passed - Congrats and well done.
If you haven't yet done so, go register on Analyst Forum - it's worth it.

So far I've heard from the three former students who took the L2 exam this time around (all took the L1 exam in the last 18 months) - one passed, and two failed. Not bad, given the overall pass rate was 41%.
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How To Remember Material For the CFA Exam

I just read a study that is highly applicable to anyone who's studying for the CFA exams, since there's a ridiculous amount of information that must be retained. When people ask me how much they have to study for the L1 exam, I answer "about 16 pounds", since that's the weight of the curriculum.

But the study is applicable to students in many other disciplines.

The study is titled "The Critical Importance of Retrieval For Learning" by Jeffrey Karpicke and Henry Roediger, and it's in the February 2008 issue of the journal Science. They examine the question of how best to improve long-term recall. Specifically, they tested whether, once a student can recall a piece of knowledge once, they most improve their long term recall by repeated studying of the material, by repeated testing of the material, or both. Here's the abstract:
Learning is often considered complete when a student can produce the correct answer to a question. In our research, students in one condition learned foreign language vocabulary words in the standard paradigm of repeated study-test trials. In three other conditions, once a student had correctly produced the vocabulary item, it was repeatedly studied but dropped from further testing, repeatedly tested but dropped from further study, or dropped from both study and test. Repeated studying after learning had no effect on delayed recall, but repeated testing produced a large positive effect. In addition, students' predictions of their performance were uncorrelated with actual performance. The results demonstrate the critical role of retrieval practice in consolidating learning and show that even university students seem unaware of this fact.
So, the takeaway is that the best way to retain (for example), the Black-Scholes option pricing formula isn't to keep going over the formula once you've gotten it down - it's to repeatedly TEST yourself on it. I don't necessarily mean a formal test -- just put the formula on a flash card and periodically (every couple of days at first, but eventually at longer intervals) try to write it out. After that, check your results against the flash card.

Of course, if you're studying for the CFA exams, most of the test-prep companies have test banks with numerous questions on each topic, so using them would be perfectly consistent with this approach.

I almost forgot - you can read the Science article here.
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My Students Are Getting Their CFA Level 1 Results

For the first time, I have five students who sat for the CFA Level 1 Exam. Today's the day results are given out.

So far, three have reported in, and two of those passed. Well done, lads.

I have a bet with my Dean that three of the five will pass. So, I need one more out of the two remaining...

update: It's now three out of four (the 4th, who didn;t make it was in the top band of those that failed, so he should make it in December). I guess that means the Dean owes me dinner. Since the overall passing rate is 35%, our initial group of Level 1 test takers have done very well.

Note: if you want to calculate a rough estimate for your score, here's a link to a scoring calculator someone hacked together.
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It's CFA Level 1 Results Day!

Results for the CFA level 1 exam came out today. According to the CFA Institute, there was a 46% pass rate - the highest in years. I don't know if it was due to the move to 3-answer multiple choice questions or to a better-than-average candidate pool (there were probably a number of people out of work with extra time to study in there). Either way, congratulations to those who passed - you can now register for the Level 2 exam. If you didn't make it this time, you can take Level 1 again in December.

I have 3 former students (that I know of) who took the exam, and a couple more that were considering it. I expect the three I know of did well (hopefully, they'll let me know sometime today).

update: So far, two have reported in, and one passed - still waiting on the thrid.

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Here I Go Again!

As many of you know, I'm in the midst of taking the CFA (Chartered Financial Analyst) exams. I had been registered for the Level 3 exam this last June, but dropped out because of the Unknown Son's health issues (and I'm glad I did, because the time was much better spent with him in his last days).

Well, I just re-upped and re-registered for the 2010 exam. So, I'm once again a Level 3 Candidate. At least this time I'm already familiar with well over half the material, so it shouldn't be nearly as stressful.

I might even start early and keep with it this time around. With luck, I might be done with my first pass through he material by January 1. While that seems early, if I shoot for January 1, I'll probably actually finish by March or so, and then I can focus on actually locking this stuff down. After all, the material is interesting, but I don;t want to take any more exams for a while after this.
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How Do They Determine A Passing Score on The CFA Exams?

Since the CFA June exams are now done, there's a lot of concern as to how CFAI determines a passing score. So, here's a breakdown for Levels 1 and 2:

In the past CFAI used a strictly numeric method of calculating the pass rate - they'd take 70% of the 95th percentile score. So, back in the day, the minimum passing score would be no greater than 70%, and would typically be even less.

Now, their scoring system has a significant subjective component to it. Here's how it works: CFA Institute brings a number of charterholders that they call "Standard Setters" to Charlotte sometime in June. These people then discuss what they think a "minimally qualified" candidate should know (for L1 and L2). CFAI is pretty opaque as to what this actually means, but my understanding is that they look at the exams and come up with "the score".

They refer to what's know as the "Angoff method". If they apply this method in its strictest sense, this would involve each standard setter examining each question and making a subjective determination as to what percentage of well-qualified candidates would answer correctly on the question. For each question, the standard-setters percentages are averaged to get a percentage for that question. The individual question-percentages are then summed to get the passing score (in terms of number of correct answers needed).

So theoretically, the minimum passing score could be above 70%. But according to the scuttlebut on analyst forum, the minimum has likely been below 70% in each year. So, my gut reaction is that a 70% would get it done, and even slightly less.

But that's just a guess on my part.

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Let The Second-Guessing Of The CFA Exam Begin!

One of the frustrating parts of taking the CFA exam is that there's between a 6 and 8 week (depending on which level you took) lag from the time you took the exam to the time you get results. So, there's a lot of time for second-guessing, wild mood swings, and so on. Several of my students and I took the exam at the same test center, and we all shot the breeze over lunch. They were all pretty confident after the morning session. I've already talked to one of them this week (yesterday), and he said that right after the exam, he felt pretty good overall.

Now today, he said he's started the second-guessing. I warned my guys about this, but it's still hard to avoid.

I'm a regular reader of (and sometimes contributor to ) AnalystForum. It seems like the same thing is going on there in the Level 2 forum. It's understandable, since the group there is a pretty open one, with a lot of participation (damn! - I wish I could get a bunch like that in MY classes).

But relax, all. What's done is done, and we'll know the results when we know. If we make it, there'll be plenty of time to start studying for the next level. If not, we'll have plenty of time to start plugging the holes in the current one that we'll have to retake.

But it's still hard to wait.

Ah well. In addition to the exam, I also got two rejections this week. Now I have to patch them up and ship them back out so I can stay compliant with Mungo's Rule (see #5-b). And there's more data to torture for new projects.

To the Bat Cave, Robin!
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Last Minute Fun With The CFA Exam

T'was the night before the CFA exam, and of course the Unknown Son starts complaining loudly of severe stomach pains. Of course, this ended all possibility of any last-minute reviewing. He started vomiting repeatedly, and ended up sleeping in our bed with the Unknown Wife, and I went to the guest bedroom (no way I'd get to sleep with a sick kid in the bed).

I got up early the next morning and went to the exam. Just before heading in, I called home to find out that unknown Son was on his way to the hospital. He was admitted in the morning after tests revealed elevated liver enzymes, which typically indicates some kind of viral thingy in the liver.

Despite concerns in the back of my mind about Unknown Son, the morning session of the exam went surprisingly well - or at least I thought so. The afternoon session, on the other hand, was a different story. The best way to describe it is "They didn't call, they didn't send flowers, and they didn't respect me in the morning." So, I have no clue if I made it over the hump or not.

Ah well, done is done. I headed home, changed, and went to the hospital to relieve U.W. and sleep overnight in Unknown Son's room. At least, I slept from 12 until about 6 - he was more interested in reading me sections of his latest book selection (Diary of A Wimpy Kid). His liver results were more normal today, so he got discharged this afternoon, with follow-up tests for later in the week.

With this behind me, I'm eager to put the books down and get back to research tomorrow. For tonight, it's SLEEP (I already took at two-hour nap this afternoon, and should get a good 10-12 hours in).
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Students Sitting For the CFA Exams

I just realized that I have at least six students that I know of sitting for the CFA exams in a couple of days. Three are sitting for Level 1 - all either graduated this past month or last December, and three are sitting for Level 2 (they graduated either last June or last December). There are a couple of other former students who'd indicated they might be taking the Level 1 exam, but that was a while back and I hadn't heard from them since.

Good luck, one and all.
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Another Few CFA Test Taking Tips

It's a time for a break from studying. So, here area few more CFA test-taking tips:
  1. Accept the facts as a given - In other words, you might think the scenario given in the question is far-fetched or even incorrect. No matter - assume it's true, and work from there.
  2. Read Carefully! - in particular, watch for negatives and double-negatives. Make sure you pick up words like "least", "most", etc... In fact, you might want to underline them.
  3. If you work out of order, make sure you fill in the correct bubbles. If you mess up (even if you catch it later), it could cost you a lot of time to fix.
  4. Read ALL the answer choices - in particular for questions that ask for the "most" or "least" correct. Don't stop at the first seemingly correct one.
  5. Rephrase the question - sometimes there can be complicated phrasing (see #2 above).
  6. Underline the relevant facts
  7. Try to answer the question in your own mind before reading the answer choices.
As far as what's the best order in which to answer questions, there are a couple of schools of thought. In my opinion, it's best to start with a section you're most comfortable with. That way, you'll build your confidence and "bank" some points." But if you take this approach, keep these points in mind:
  1. Try not to start with ethics - the questions can be lengthy, and can suck up a lot of time.
  2. If you do start out of order, make sure you enter your answers in the correct parts of the answer sheet (see # 3 above). Doing your "most comfortable" section first makes sense. But I'd recommend against doing the whole exam in this way -- if you do, it's all too easy to get confused. So, it might make more sense to do only one or (at most) two "strong" areas and then just work the rest of the exam in order.
  3. Some questions can be real time-wasters (like multistage stock valuation ones). If you're pressed for time, mark these and go back later. A real "time waster" can suck up the same amount of time that it would take to tackle 2-3 easier ones.
  4. Check your answers when you're done.
  5. Don't change an answer unless you have a good reason.
  6. Don't panic if you hit a string of hard questions. There are a total of 240 questions on the Level 1 exam and 120 on Level 2. Although CFA Institute is not very clear about the level needed to pass, a 70% should be plenty (and as low as a 65 or so might do it, but that's just a guess on my part with no empirical support). So, keep moving, and don't panic.
  7. Finally, plan on checking yourself at the 90 minute mark to see how your progress is and check once again with a half-hour left to make sure you haven't left things blank, put answers in the wrong spaces, etc...
Good luck, and keep studying.
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Today's CFA Exam Tip

As I continue to grind through the CFA Level 2 material, I'm struck by the number of questions that use a "Which of the following statements is the least true ..." format.

Here's a tip to minimize the chance that you'll misread these types of questions: cross out the "least true " and write in ""Which of the following statements is "FALSE"".
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An Ethical Weekend

Spent the weekend going through the Ethics material for the CFA Level 2 exam. It's pretty dry, and nary a number in over 200 pages of text. But, the Level 2 exam is weighted about 10% on the exam, so it's got to be done.

Now all I have is a quick review of Portfolio Management (I've gone through it once already, but after 299 pages of Ethics, I needed to see some numbers) and then it's on to Derivatives (for the first time). So, with luck, I should be done with my first pass through the Level 2 material with over 5 weeks to go.

The next topic after Derivatives will be a review of Financial Statement Analysis. Although I've put some time in, it's still my weakest topic, and it could comprise a quarter of the exam.
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The Semester Winds Down

It's that time of the year - I have one more day of classes, followed by final exams. My student-managed investment fund did a bang-up job on their end-of-semester presentation to the advisory board, so that's another big item to cross off the list.

So now all I have to do is write a couple of final exams, grade them and some final projects, and start my summer.

The only downside to the end of the spring semester is that there are always a couple of students who thought they were "graduating seniors" who found out only the second part of the phrase is correct. But for the most part, they already know where they stand.

Now it's on to summer research and studying for the CFA level 2 exam (only 42 days until the big one).
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A Good End To The Semester

Teaching can be frustrating, but it has its moments. I just ran into one of my best students - 3.9 GPA, got a CFA scholarship, is doing an honors project, etc...

Since he's planning on taking the CFA Level 1 Exam in June, he had some questions about how best to get started on the material. So, we talked for about a half hour, and I lent him my study notes so he could get started over the break (he hasn't yet gotten his material from Schweser and CFA Institute).

I wouldn't be surprised if he has the Accounting and Ethics sections (and probably the Quantitative Methods) of the CFA material locked down before he gets back from Christmas break.

If only I had a classroom full of students like him. But that would be too easy.
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Another Online CFA Resource

A surprising number of folks find Financial Rounds when searching about CFA related information. So, whenever I find information that might be helpful to those making the slog towards the designation, I'll post it here.

I was looking through my Sitemeter log, and I came across a number of hits from people who'd recently visited AnalystForum.Com. So, I checked it out. If you're working towards your charter, it's definitely worth a look-see. They have a number of online forums - one for each exam level, and a general one for everything else. There's a lot of information there, and a very open group of folks who are extremely willing to answer questons. And it looks like a great way to get linked in to a community of like-minded folks (and networking is always useful).
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Down With The Flu

The last couple of years, I've gotten a flu shot every year (I've caught the flu before, and I'll take the minor discomfort of a shot to that any day). Unfortunately, a good number of flu cases this year were from a strain that wasn't covered by the vaccine. The Unknown Family had four of those cases. They're now mostly over it, but I've developed my yearly case of bronchitis as a result. It's funny how the timing worked out - Unknown Son started spiking a fever of 103 Thursday night. Since fevers over 100.5 are cause for concern for cancer patients (with a surgical port and a possibly compromised immune system, infections are a constant concern - if he gets one, it's serious). So, we went to the ER at about 10:00 Thursday night. It turned out to be the flu, which, while not trivial, is far better than infection. In any event, they gave him fluids and antibiotics, and we were back home by 11:00.

Unfortunately, I had to get up the next day at 5:00 to get to the CFA Level 2 accounting review I was taking (it was several hours' drive to the hotel where it was being held). Let's just say that it was a bit difficult focusing in accounting for 16 hours over two days with a sleep deficit and the onset of the flu. Having said that, John Harris' workshop was outstanding. He may well be one of the best instructors I've seen in my life. For anyone with concerns about their grasp of the accounting material, I'd highly recommend him.

After that, I had to fly out of town Monday morning to attend the dissertation defense of one of my students from my previous school (they passed, by the way). After the defense, I spend the afternoon working on a paper with my coauthor (who's also the aforementioned student's major professor). It's always easier to write with both authors in the room, since the give and take is critical.

In any event, I managed to survive the week. The Unknown Family is pretty much over the flu. Unknown Son had low white blood cell counts on Wednesday, so we postponed his weekly chemo until next week. It was likely just an aftereffect of the flu rather than from the chemo, but it's better to be safe in these cases. I still have the bronchitis, which will take another week or two to completely recover from. But on the plus side, the frequent violent coughing spasms have stopped anyone from asking me to volunteer for any new assignments (no one wants to get close enough to ask). So even bronchitis has its upside.

In any event, that's about enough. Unknown Son is watching a movie with a friend, and a friend of Unknown Wife is coming over tonight to babysit. So, we get a rare night out. Woo Hoo!
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CFA At Unknown University

This seems to be the season for things CFA-related. I've just seen the pool of students who've applied for CFA scholarships from Unknown University. We had eight apply, and the weakest of the bunch has a 3.4 GPA (and there's one student who's a finance undergrad currently getting a Masters in Accounting - definitely a plus when dealing with all the Financial Statement Analysis/ Accounting material on the exam).

So, I think we'll be able to pick five extremely good candidates. We also just found out that the local CFA chapter has a few additional scholarships to award, and that they'll be happy to let us do the initial sorting for the scholarships.

I'm particularly happy that seven of the eight applicants for the scholarships are my current or former students (one took me for three separate classes). So, they actually listened to some of what I'd been saying all semester.

On a somewhat related note, this Wall Street Journal article details the lengths that CFA candidates go to take the exam in India. And here I was worried that I had to drive a couple of hours to take it myself.
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