Finish Line?

Since the dawn of time, mankind has gazed upon the heavens and wondered… many hours does it take to prepare for a CFA exam?

My time in the CFA program has reminded me very much of my (brief) stint as a PhD student, due to its associated qualifying exams. Any time away from work or class not spent studying is spent fretting about how you should really be studying.

So let’s take a stab and see if we can come up with an answer for how many hours are required. That’ll let prospective CFA candidates gauge the impact to their social life, as well as help those candidates currently preparing to know when they’ve crossed the finish line and can return to engaging in frolic.

If you do a little web-surfing you’ll come across various bits of information, some even from the CFA Institute itself, that claim that you need to put in a minimum of about 250 hours per exam. Therefore, let’s say that 250 hours is roughly the required time to make the equivalent of the usual 70% required to pass a college exam.

Would you stop there? Chances are, the higher up you get into the program, the greater the probability that the test-taker sitting next to you has the genetic disposition towards over-achieving. If you’ve made it to Level 2 or beyond, you probably have that gene mutation too. We want to be better than average. That’s why we’re in the program after all…

So if 250 hours is a 70%, what might it take to shoot for 100%?

Solving for X yields 357. So that’s roughly 100 hours on top of the minimum 250.

But CFAs are supposedly the Navy SEALs of the investing world. Prospective charterholders aren’t going to slip through by merely shooting for 100%. To guarantee membership in this elite unit, the best of the best, you want to give it the proverbial 110%!

The only easy day, was yesterday...

So there you have it: 250 hours to probably pass, 350 hours to most certainly pass, and 400 hours to really be able to say you gave it all you could.

With 3 months left until exam day I have so far logged a meager 75 hours, so I’m maybe more on the path to a Navy Cook than a Navy SEAL. There is some encouraging news though, and that is my practice test progress.

Onwards and Upwards

Don’t you just love the single variable linear regression and associated R2? Straight outta Level 2! Let’s draw some conclusions from the data:

(1) The y-intercept says that I began Level 3 with the ability to score 57% on a practice test without even cracking a book (pure guessing would have earned me 33%).

(2) The slope is kinda tiny, but the time frame is looong. Been studying about 210 days and have taken about 21 practice tests. So my study routine (or lack thereof) is increasing my test score by about 0.71 points every 10 days.

(3) So if I continue on my current routine, with about 90 days left till test day, I can hope to increase my practice test score by 6.4 points. This moves me along the current trend line from today’s 70% to 76% in June.

(4) And the R2 of 45% says that my progress isn’t really a straight line. I’d bet a multifactor model introducing two new variables (amount of sleep, number of cups of coffee) could get that R2 up to 95%. But who has time for multiple regression! And isn’t there probably some multicollinearity mojo between sleep & coffee?!

My gut says that past practice test performance is no guarantee of future real exam results. After all, Level 3 has essays! In truth I’ve got to really switch into high gear to log 175 more hours just to get to the suggested minimum in the next 3 months. Navy Cook I tell you!

In the mean time, I can only hope that my strategy of specifically studying the areas I’m performing the worst in will somehow pay off. It’s the old engineering optimization trick of minimizing mean squared error. If it works for signal processing, why shouldn’t it for the CFA?

Update: I finally passed all the CFA exams and wrote an eBook about the program. If you’re interested, click here.