CFA Scores and Financial Ratios: What do they have in common?

[Arif Irfanullah]

“I got 68% on my mock exam. Is that good? How am I doing? Will I pass?”
A lot of my students tell me their score and ask whether it is good or bad. This is also one of the more commonly asked questions on AnalystForum close to exam time.
Unfortunately when you have a score that is somewhere in the middle, it is hard to say where you stand. In a sense your score is like a financial ratio. If someone says: My company’s inventory turnover ratio is 7.9. Is this good? The answer is, it depends… on the industry and where your company stands relative to other companies in the industry. For an industry where the average turnover ratio is 6.5, your ratio of 7.9 is good. However, if the industry average is 9.5, then your ratio of 7.9 is bad, all else equal.
You can think of your score in a similar manner. For every exam, the CFAI comes up with a Minimum Passing Score (MPS). The process for arriving at the MPS is explained on the CFAI website, but simplistically it is based on the difficulty of the exam. On a tough exam the MPS will be relatively low and on an easy exam the MPS will be relatively high. Hence MPS is roughly analogues to the appropriate ratio for an industry. Whether or not a company is doing well depends on its ratios relative to the industry. Whether or not you are doing well depends on your score relative to the MPS.
Now let us come to the very practical question of what is a good score on the 2012 CFAI Level I Mock Exam. I strongly encourage every December 2012 candidate to do the Mock exam in an exam-like setting about 1 week before 1 December. This is the best possible practice for the actual exam.

 

[numi]

Arif Irfanullah wrote:
I’ll conclude this article with a quick question. What is the potential bias in the data that I’ll collect? (Hint: Think Hedge Fund Indices)

Survivorship bias, obviously

 

[mattmania]

Selection bias, only those who have read this article and are very keen will send in their results. Suspect an upwards skew and some terrified candidates!

 

[Arif Irfanullah]

As promised I’m sharing the results.
Average score (as a percentage): 71%
Standard Deviation: 10
Bottom Quartile: 50% - 64%
Second Quartile: 64% - 75%
Third Quartile: 75% - 79%
Fourth (best) Quartile: 79% - 86%
Data size = 38
Purely based on the data I received, the top 35% were: 77% and above.
I give this number because typically about 35% of Level I candidates pass.
However, I suspect a strong bias in reported data. I feel the following people were more likely to report their scores:
1) People who were relatively well prepared (those who were not prepared probably did not have the mock done by yesterday)
2) People who do well are more likely to report their data (similar to Hedge Fund Indices)
3) My students, who generally perform above average, are more likely to report their score (sorry, this is my bias
Given the above, my purely subjective view is that the passing score on this exam is about 70% (Total Raw Score of 168)
Regardless of how you did on the mock exam, slog over the last few days and try to nail the actual exam.

 

[BBUI]

So, this is nothing new

 

[wianek]

Arif Irfanullah wrote:
Now let us come to the very practical question of what is a good score on the 2012 CFAI Level I Mock Exam. I strongly encourage every December 2012 candidate to do the Mock exam in an exam-like setting about 1 week before 1 December. This is the best possible practice for the actual exam.

Doing the mock exam just 1 week before the actual exam is cutting it too close. You need to leave yourself more time for review, especially if your score is fairly low.