Cheating on CFA Exam

Just thought I would mention the subject given the recent news on the SAT/ACT tests (see:

I think most of us who take this test know cheat is going on. I’ve seen individuals with formulas on index cards in the bathroom. I’ve heard stories of rampant cheating at a test center in a non-North American location.

Anyone else have thoughts on cheating on the exams? it would be nice if CFA spent more money on security, video cameras, monitoring, and maybe even metal detectors. I know the FINRA tests you have to empty out all your pockets to show you have nothing in your pockets. IDK why CFA doesn’t set the bar higher. We’re gonna pay at some point when the value of the credential is downgraded.

Wow, which test center is fitted with a bathroom, that would be great for relaxation. On a serious note, cheating is a disgrace. I would rather fail than cheat in an exam.

I’ve had contact with lots of people accused by CFAI of cheating. Most of the people accused of cheating are caught doing dumb and pretty useless things, like looking at someone else’s paper or writing past the time expiration. It seems that most of this cheating is just going to get people maybe a couple of additional correct answers. Not enough to make a real difference. The formula sheet in the bathroom is similar. How many times are you going to go to the bathroom and how much is that really going to help? I would eliminate that kind of cheating by just letting people bring in formula sheets. In the real world, we have formula sheets (Wikipedia). Why not allow people to bring them in? It’s easier to make a substantive test if you can factor out the memorization issue. I have never heard of any impersonating someone else to take the CFA exams. I think that there just aren’t that many people out there who would want to do that because the curriculum changes every year so everyone would have to do significant study. I’d plan on doing 100 hrs to pass Level II or Level III and I’ve taught this stuff so many times (as well as having passed each of those once).

only 100 hours to pass L2 or L3? Was that back in 1967 when the entire curriculum was one book and the equities section ended at the dividend discount model?

i honestly don’t think you can cheat all that much on the CFA test. most of the questions that made me think twice i couldn’t have solved with a cheat sheet. really, there aren’t too many formulas in the CFA. most of the concepts are straight forward. The only thing that usually bothers me is the guy sitting next to me who happens to make noises.

if they allow for formula sheets in the exams that would be weak. knowing the formulas is the easy part. knowing when and how to use them is the hard part. if you can’t remember the formulas, you don’t really understand the concepts and are just looking to pass the exam but not truly absorb the information. and 100 hrs is a maximum per exam if you had an education in finance.

I believe JDV was saying he would still spend that much time if he was retaking the exams even though he’s still up to speed on the material. I think that feels about right if I had to do them over again. Anyway, I don’t really care about this issue. I took L1 in San Fran and the test center had something like 1000 people there. I wouldn’t want to stand in line airport-security-style just to be sure some jackass doesn’t sneak in a flashcard with some formulas on it. People should just worry about themselves and not what other candidates are doing. If they cheat and don’t know the material, chances are they suck at life and they’re not a threat to you.

its not how many hours you put in, its how much you need to put in to win for sure. i easily did over 100. why take a chance when you don’t have to.

I would spend 100 hrs to pass L II or L III right now. I spent more time to pass those when I originally took them. My point was that 100 hrs would be lots of time to spend studying so I would really need to be compenssated for it. I wouldn’t be a typical CFA candidate as a) I’ve already passed these exams; b) I’ve taught review classes for at least L II; c) answered a bajillion questions about this stuff on AF; d) Taught this stuff for years as a college professor. Lots of this stuff I have down totally cold without opening a book. For instance I wouldn’t spend two minutes studying derivatives, equity analysis, or quants. I would spend lots of time on FSA.

It’s funny that you and I seem to agree on the status of the formulas - that memorization is nothing and that understanding the concept is everything - but we reach different conclusions on what to do with that. A couple of observations: a) During my yeaars as a college prof in my first career, I taught lots of statistics. I think memorizing all those test statistics so you can spit them out on an exam is useless. I used to allow people to bring in one index card on the first exam on which they could write whatever they wanted, two for the second exam (presumably the first and a new one), three for the third, and four for the final. I think it freed people from memorizing stufff, but it also meant that people who thought they had a free pass on the exams failed as I ceertainly didn’t ask questions for which knowing a formula was sufficient for getting the question correct. b) I think the charter would mean more if it was a more real-world test. If I ask someone to price a derivative, I couldn’t care less if they have to look up Ito’s lemma or something. In the real world, we have books and computers. Why should we construct a test that asks people how well they can get along without books and computers? I’d be okay with a CFA exam that let people bring in laptops. Of course, everyone who failed would say it’s because of time pressure because they couldn’t learn something new in the amount of time given for the exam. But think how much more interesting the exam could be. E.g., Estimate Netflix’s cost of capital…

I think CFA is theory based. plus, a standardized exam must have standardized answers that are easy to evaluate.

I am not sure what you mean by theory-based, but it’s not close to the level of abstraction of most academic finance. I really believe that the CFA exam is about making people more accomplished finaancial analysts and I thnk it works pretty well. I’ve graded essay exams for CFAI. Who says we can’t grade essay answers like “Estimate Netflix’s cost of capital”? I feel like I could do that with lots of reliability and validity. The problem would be limiting the answer a little. For instance Netflix just sold $200M worth of converts or warrants or something to some private equity firm with a bunch of conditions attached. Estimating the cost of that capital is a muddy project.

@JDV: how would be able to structure a “real-world” test to be objective, however? If you move away from pure theory questions or clean, textbook problems into the gray area of the real world, you might be introducing a great deal of subjectivity into the grading. Allowing index cards and formula lists is a great idea though, it would certainly make the test more applied and get rid of useless memorization of crap

@mobius: i continue to diagree completely. there is no need to memorize if you can derive the formula from your understanding of the concept. those who memorize formulas will likely have a difficult time passing anyway as CFAI questions are much less about the formulas themselves than about knowing concepts and using that concept knowledge to work through the problem. often CFAI questions will require that you rearrange a formula in order to get the right answer. if all you do is memorize formulas, how will you know which formula to rearrange? i think CFAI is far too concept focused to allow formula sheets to be allowed when writing the exams. formulas summarize the concept, not the other way around. providing formulas would be like providing the answers to every question. i do think the “real-world” concept is interesting but would still be against the use of formula sheets…

i find your argument self-contradictory, MLA. if the goal of the exam is to be concept-based, as you and i seem to agree, and the focus is on the application of the formulas - testing the candidate’s understanding of the formula and ability to rearrange it and apply it in different contexts - then there would be absolutely no issue with having index cards. if having the formula is identical to having the answer to every question, as you are saying, then the questions being asked must be too shallow, uninteresting, trivial and not really testing the candidate’s applied knowledge of the underlying concepts

I don’t know what the fuss is all about. CFA has done a great job prepping me to do real world work. I’m fine 100% with the program.

Agree with JDV on this one, just allow the candidates a formula sheet, you gain nothing from memorizing hundreds of formulae. The real benefit is knowing when and how to apply them, not remembering their exact form. You’d find that the competent candidates properly wouldn’t need them much anyway, but it would shift some of the focus on to more interesting aspects of the curriculum besides memorization.