A brief investigation into the mysterious increase in the CFA pass rate

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As we've mentioned before, CFA exams are not very easy. More people fail than pass them. This year, however, the balance has shifted in favour of passers.

Bloomberg notes that 46% passed the CFA Level 1 this year, up from a bleakly depressing 35% in 2008.

Does this mean the CFA is now akin to the A level or level one clarinet? No. the CFA Institute points out that the long term average pass rate for Level 1 is 45%, suggesting last year was the anomaly. It also offers various explanations for this year's rise, chief among them being the fact that students are keener than they used to be.

"We experienced much lower no-show rates at level I this June relative to the past 10 years. This indicates to me that the candidates enrolled are very serious about the exam," says a spokesman in the UK.

Last year's retakes may also be a contributory factor. So may the geographic distribution of candidates: Europeans have a greater tendency to pass.

Suggestions of dumbing down are refuted by the CFA's enormously complicated standard setting procedure. The pass rate varies year on year and is determined using the 'Angoff method,' described as follows:

This method involves a large and diverse group of CFA charterholders. The lead psychometrician divides participants into two smaller groups for each level of the examinations. Each participant reviews the entire examination question by question and makes an independent judgment on the expected performance of a just-competent candidate on each question on the examination.

Participants review the entire examination a second time after briefly viewing general impact data and overall actual candidate performance on the exam. In the second round, each participant again records his/her judgment as to the expected performance of a just-competent candidate on each question.

In this way, both difficulty of the examination content and actual candidate performance are considered. The workshops result in MPS recommendations that equate to competence in the subject matter from the perspective of demographically representative groups of charterholders. The size of the group, its diversity, and its reliance on independent judgments contribute to the power of standard setting results.

Longer term, the Institute seems to be expecting pass rates to fall, which is not entirely surprising as candidate numbers seem to keep rising all the time.

CFA pass rate

Source: CFA Institute