HOW IS CFA EXAM GRADED?

CFA Exam

After giving your CFA exams you wait anxiously for the results. Typically the CFA institute releases CFA level 1 and 2 exam result in 60 days and that of CFA Level 3 exam in 90 days. After waiting for so long what pops on your screen is “Pass” or “Did not Pass”. All the anxiety and hardwork boils down to these two phrases. If its pass well and good, but if its not you are surrounded with a lot of questions. What went wrong? Papers went well, then why did I not clear? Why have they changed the minimum passing score? Did I choose the wrong CFA coaching institute? Etc.

Well, in this article let’s try to find out that how is the fate of your CFA exam decided. How much ever unfair it seems to many, CFA institute has an elaborate and detailed process to grade the CFA exam.

  • First step in grading a CFA exam paper is to reevaluate the question papers after bringing into account the complaints logged during the exam. If the questions seem unfairly unclear the students are given the benefit of doubt and get a score.
  • All the multiple choice questions are then machine checked. However 5-10% of these are reviewed by graders so as to eradicate the errors that even a machine can make.
  • The essay type (for L3) questions are graded by a team of graders who are unaware of names or centres of the candidates. The CFA exam papers are evaluated over a period of 2 weeks at Charlottesville, VA. These graders are the elite charterholders who are the experts of their field. After an elaborate scanning process a charter holder gets the opportunity of entering this coir of graders.
  • They grade the papers referring to the answer key provided by the CFA institute. The key layouts the technical answer expected and ones influenced by perspective are graded by their knowledge and expertise in the field under consideration. That is why every team of 3-4 graders are assigned 1 question or question part, which belongs to their area of expertise.
  • Then there are junior, senior and graders of the graders. They check each other’s work and ensure that the answers are scored in an unbiased manner and also ensure consistency and quality control.
  • After this step the top 25% and bottom 25% candidate’s fate is sealed and the middle 50% candidate’s papers are reevaluated to make sure no mistake has been made in grading their papers.

After the grading gets completed the next biggest hurdle that CFA aspirants have to overcome is the infamous MPS. It’s that area of the CFA exam grading that remains questionable, as it is never revealed with clarity. It is not even consistent so that students have a target to run for. It changes every year and CFA institute has its own ways to determine it.

After the grading is completed the CFA Institute Board of Governors meets and decides the MPS. While doing so, they take into account the difficulty of each exam conducted globally and ensure fairness of the scoring system. Once the MPS is set, the CFA Institute generates the results of the candidates who took the exam to determine who passes and who don’t.

You know what can save you at the last stage of evaluation? ETHICS!. If your results are borderline, graders will go back and check out how you did in the Ethics section. If you performed strongly, your borderline score becomes a passing grade. If you failed the Ethics section, your borderline score turns into a fail. This “Ethics Adjustment” was instituted by the Board of Governors to place emphasis on ethics. This started in 1996 and has become a factor in the pass/fail decision for those scores that are borderline. So next time in your CFA coaching institute, sip up a coffee and be very alert during your ethics session!

Despite explaining the fairness and accuracy of the grading system, the lack of transparency in MPS determination raises question marks in the minds of the students who do not clear. But instead of fighting and pondering over something one cannot change, it’s better to work hard and prepare flawlessly for your exams. Know your learning style, and arm yourself with the best tools to allow yourself the best chance to pass.

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