# The passing rate should be high, at least 70%

Here is why : Lets look at 2 ratios : 1. the “always on first time” ratio : passing rate LI (n-2) * passing rate LII (n-1) * passing rate LIII (n) 2000: 21% 2001: 28% 2002: 15% 2003: 16% 2004: 13% 2005: 7% 2006: 15% 2007: 8% 2008:?? With a LIII 2008 passing rate of 40%, the ratio is 6.2%. 50%, 7.8% 60%: 9.36% 70% : 11% Even with 70%, we are far from the historical average. 2. Second ratio: “number of passed level III on year n” / “number of level I candidates on year (n-2)” 2000: 29% (29% of level I candidates in 1998 passed the level III in 2000) 2001: 41% 2002: 21% 2003: 24% 2004: 20% 2005: 12% 2006: 28% 2007: 15% average : 24% Now, the number of candidates on level III in 2008 is roughly 15,000. We were 54,549 level I candidates in 2006. If the ratio is 10%, this means that 5,455 2008 LIII candidates will pass. This means a 33% passing rate. A 20% ratio means a passing rate of 66% A 30% ratio means a 99% passing rate.

What a great piece of analysis, you had me right up to the bit when you started talking about ratios. Have you consider a career in some form of analysis role, perhaps in Finance??

data mining

I wouldn’t use historical averages to guide any forecast for 2008 in this case. If you throw these numbers on a graph it’s pretty obvious there’s a downward time-trend to consider (with some random noise). So the historical averages probably overstate the expected 2008 values. A longer history would be helpful. Perhaps you could apply some sort of ARMA (or other) technique if you’re in to that sort of thing…

IF so, I can guarantee you that I will pass. But the problem with analysis is that you did not take into consideration the most recent trend.

Two things complicate this. I did a regression a few months back when someone provided pass rate data. What happened is that there was a downward trend in pass rates over time that appeared to affect both L2 and L3 pass rates (didn’t check L1). Once you had considered this trend, the scores on L2 and L3 turned out not to be significant, so the downward trend is the most important. I think the result suggested a pass rate (not MPS, but % of takers passing) in the high 50s. The other complication is that CFA is clearly making some changes in the program and curriculum at the moment. The most obvious change is that they are forcing people to buy the books and probably designing tests slightly differently because of it. They have moved around things in the curriculum substantially. They have changed their method of determining the MPS a few years ago. So it means that past data may not be as relevant to the current trends as they have been. But how to measure those things is tricky; mostly, one has to be aware that “past performance may not guarantee future results.”

bchadwick Wrote: ------------------------------------------------------- >They have changed > their method of determining the MPS a few years > ago. So it means that past data may not be as > relevant to the current trends as they have been. > Can you elaborate on this? What changed and how do we know this? I read the 05 document that discusses the mps for that year, but was not aware of any other info / chatter regarding the grading process. Thanks

I believe that they used to find the 95 percentile score and set MPS at 70% of that, perhaps +/- one point for rounding. Now they use a method (can’t remember the name, but something like Angoff or something), where they try to decide on what a marginally passing candidate should be expected to complete correctly, and use this to figure out what the MPS should be. I can’t 100% confirm that CFAI uses this method for the CFA exams, but they do claim to use it for the CIPM exams. At some earlier post, JDV mentioned that CFAI uses Angoff for the CFA exams too, and I decided to believe him on that. http://www.cfainstitute.org/cipm/exams.html Standard Setting for the CIPM Exams Standard setting is a rigorous, systematic process that is widely employed in professional credentialing programs. CFA Institute uses standard setting as an input into the minimum passing score (MPS) decision-making process for the CFA Program exams. The CIPM program employs the Angoff standard-setting process, considered by test and measurement experts to be a reliable evaluation method for selected response exams. The process involves assembling a panel of practitioners who are familiar with the knowledge, skills, and abilities required of competent practitioners in the field of investment performance valuation and presentation. Working under the direction of professional test and measurement specialists, the panelists go through an organized process to assess candidate performance. The MPS is determined after the completed questions have been subjected to thorough psychometric analysis and the standard setters have concluded their evaluation.

consistent with my guess: 62.5%

did you account for the 2 times a year L1 administration? you’d need to do: Prob{[pass(L1JunYr1) OR pass(L1DecYr1)] AND [pass(L2JunYr2)] AND [pass(L3JunYr3)]} giving probability of passing in consecutive attempts as: [%TookJunYr1*passrate(L1JunYr1) + %TookDecYr1*passrate(L1DecYr1)] * passrate(L2JunYr2) * passrate(L3JunYr3) plus you’d need to forecast out the trend effect also as the others said interesting take on it - predicated on assumption that the honors students ratio stays same over time, and that the distribution of motivation and skills stays same regardless of number of people taking exam. i doubt that very much, but at least we took a swag at the % passing 3/3.

I’m a big seller of 70 calls…

JDV, is that an indication??(that most of us are screwed and MPS indeed is 70% and around) :((

JarJarBinks Wrote: ------------------------------------------------------- > JDV, > is that an indication??(that most of us are > screwed and MPS indeed is 70% and around) > > :(( =============================== lol he is bearish on 70s he thinks its below 70s

I have not the time to make a complete model ! My calculations are just a proxy, an indicator. You can consider it as a stress test. Of course, nobody is in the sanctuary, so everything is speculation.

Definitely going to be 50% or lower. If anything, your analysis shows that 6-8% is the new trend (referring to the first ratio). I will be very surprised if the passing rate is 70%.

I suppose the downward trend wins… I sell 70%, buy 50-60%.

JoeyDVivre Wrote: ------------------------------------------------------- > I’m a big seller of 70 calls… If JDV’s on the offer I’m a better seller…

no brainer 70 calls is a loser… i am buying 45s…anyone expecting 50%+ is just dreamin

itstoohot Wrote: ------------------------------------------------------- anyone expecting 50%+ is just dreamin Why?