How CFA Level 1 exam is graded?

Since December 2012 CFA level I examination is over, all applicants shall be waiting eagerly for their results. Well, the countdown has already begun and all those who have appeared in the CFA Level 1 exam will receive their results within 60 days of writing the exam through email. Moreover, they will also receive the summary of their performance in the exam. Additionally, results will be available on the website from the next day for a period of one year. After that, candidate can request his result from CFA Institute but in this case he will not receive the summary of his performance.

To relieve your anxiety to some extent, I would like all my readers to know how “CFA LEVEL 1” exam is graded, how the result sheet looks like and how to analyze your results.

All the CFA Level I answer sheets will be checked by the scanning equipment. Hence the score achieved by the candidate will depend on the results processed by the equipment which in turn depends on how much appropriately the bubbles are marked by the candidate without mechanical errors. Hence, it is advisable to record the answers properly in the answer sheet.

Minimum Passing Score

CFA Institute follows the concept of arriving at the Minimum Passing Score (MPS). Once the exam is conducted, the MPS is decided by the CFA Institute’s Board of Governors. The MPS technique ensures fairness to all the candidates, since the difficulty level of paper is taken into consideration while arriving at MPS. More than 500 CFA charter holders gather at CFA Institute’s headquarters to grade the answer sheets. Charter holders only know the answer sheets by numbers. They do not know the name or the geographical region of the candidate which is done to protect the secrecy of each candidate.

Modified Angoff Standard Setting Method is used by CFA Institute to arrive at MPS. Each grader grades all the questions of the examination paper based on the expected performance of an average candidate. Once the grading procedure is completed, CFA Institute reviews the grading done by all the graders. Based on the grading and recommendations of the charter holders, CFA Institute’s board of governors set the MPS for CFA Level 1 examination. MPS is used an internal measure by CFA Institute and is never disclosed.

Once the MPS is set, CFA institute generates the results for the candidates who appeared for the exam. Pass rate is calculated as the number of candidates who pass the exam relative to the number of candidates who appeared for the exam. It has been observed in the past that 25% of the registered candidates do not appear for the exam.

How does CFA Level 1 result looks like?

CFA Institute mentions Pass or Fail in the result depending upon whether the candidate has cleared the exam or not. Along with Pass or Fail, CFA Institute also gives the summary of performance of the candidate in each section. Please refer the figure below for the sample summary of performance for a Level 1 candidate.

Now let us try to analyze the above figures in detail. The first column, Topic, indicates the all the topics that are covered in CFA Level 1 exam. Second column, Max Pts, indicates maximum questions that are asked in the exam from each topic. For example, 36 questions (18 questions in morning session and 18 questions in afternoon session) are asked from ethics and professional standards in exam. Therefore, Max Pts for this topic is 36. Now the last three columns are of major importance as far as understanding of the result is concerned. CFA Institute declares the result in three grades i.e. <=50%, 51%-70%, >70%. CFA Institute uses a combination of measures to arrive at these grades like they may consider 70% of the maximum marks, 70% of the toppers marks, 70% of the top ten scores etc. All these grades are relative. So the candidate never gets to know his/her absolute performance.

The grade scored in respective topic is denoted by asterisk (*) symbol. If we look at the above figure, the candidate has got 51%-70% grade in derivatives and fixed income investments. For all the other topics, candidate has scored >70% grade. In order to pass the Level 1 exam safely, the candidate should avoid being in <=50% grade for the topics that have high weight-age. These topics are financial reporting and analysis, ethical and professional standards, fixed income investments, quantitative methods.

I hope the article explains about the grading policy of CFA Level I examination. I wish all the December 2012 CFA Level 1 candidates all best of luck for results.

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