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Level 3 Study Room

Last Updated on 7 Jul 2004

Notes/testbank

 Global Equity and Alternative Investments

Download 1

Download 2

 Portfolio Management

 - Behavioral Finance

 - Individual Investors

 - Institutional investors

Download 1

Download 2

Download 3

Download 4

 - Asset Allocation

Download 1

Download 2

 - Performance Evaluation & Attribution Download

 - GIPS

Download 1

Download 2

 - Global Economics Download
 Risk Management Download
 Quantitative Methods - Time Series Download
 L3 Testbank Download

(Most of the above notes came from Gillie's site. I had made some updates on these notes and converted them into word format.)

Schweser Weekly Tips for 2004:

May 13, 2004

May 6, 2004

April 29, 2004

April 22, 2004

April 14, 2004

April 9, 2004

Mar. 31, 2004

Mar. 24, 2004

Mar. 17, 2004

Mar. 10, 2004

Mar. 3, 2004

Feb. 25, 2004

Feb. 19, 2004

Feb. 11, 2004

Feb. 4, 2004

Jan. 28, 2004

Jan. 21, 2004

Jan. 14, 2004

Passing Rates of L3 exam in recent years:

2004 - 64%

2003 - 68%

2002 - 58%

2001 - 82%

2000 - 65%

1999 - 59%

Schweser's Exam Hints for 2003

 Schweser's Exam Hints for 2004 (from cfa101.com) Download
 Schweser's Exam Hints for 2003 Download

Other Internet Resources

 L3 Economics LOS Notes 2004 (from Prof. Veitch 's Page) Download
 L3 Econ 2004 - Slide Presentation (from Prof. Veitch 's Page) Download
 Gillie's CFA Study Hints and Notes Link

Errata

 Schweser L3 2003- Errata Download
 Stalla L3 2003 - Errata Download

Official Study Guide 2003

 AIMR official study guide 2003 Download

What did the candidates say about their L3 experience?

Analystforum:

http://www.analystforum.com/phorums/read.php?f=1&i=43360&t=43360

Dugan's discussion board:

http://www.discuss.charterstuff.com/htdocs/dcforum/DCForumID4/665.html

http://www.discuss.charterstuff.com/htdocs/dcforum/DCForumID4/724.html

Misc Notes

 List of Mnemonic

 A list of mnemonics covering the entire CFA Level III  

 syllabus (by courtesy of Charles from Saudi Arabia)

Download

 Various Trading Costs

 A description of the various trading costs and how they are 

 calculated (by courtesy of Charles from Saudi Arabia)

Download

 Synthesis of Financial Instruments

 A description of the way in which various financial

 instruments can be synthesized (by courtesy of Charles

 from Saudi Arabia)

Download

Changes in 2004 L3 Curriculum

New Books

  • Analysis of Derivatives for the CFAR Program
  • International Investments
  • Irrational Exuberance
  • The Psychology of Investing

Study Sessions that are unchanged from last year:

  • Study sessions I and 2 - Ethics
  • Study session 4 - Quant
  • Study session 6 and 7 - Debts
  • Study session 10 - Institutional Investors
  • Study Session 14 - Portfolio Management Strategies
  • Study session 17 - Performance Presentation

Changes in LOS: Download

Other Issues:

  • Topics can be tested in either essay or item set format.
  • In 2003, the real exam topic weightings are not straightly consistent with those given in official study guide.
     

My Experience with L3 Exam

I started my CFA program in yr 2000 and completed it in four yrs with my second attempt on L3 in yr 2003. Here are what I experienced within these 2 yrs sitting the L3 exam:

In 2002, it was my first attempt on L3. With pretty good results on the 2 previous levels and high passing rate of L3 averaged at 70%, I personally didn't take the exam too serious. I studied in the same way I did on L2, but I failed the exam with very poor result on the port mgt case questions. I had tried to figure what's wrong with my own study system. These were what i did to prepare my 1st and 2nd attempt on L3:

2002:

(1) Schweser Notes +

(2) Focus on Past Exam Papers +

(3) back up with several official text bks.

Basically, I relied on Schweser Notes' presentation of the curriculum. I referred to text bks only when I got problems with the notes. I did the past papers more than twice. For some of the past PM case questions, I even did the questions for more than 3 times.

Why I failed the exam?

1) Overconfidence - Just like other candidates who went 2 for 2 with good exam results on previous 2 levels, I was overconfident on L3. Also, given L3's high passing rates in the past, I was not psychologically prepared for a tough exam. The '02 exam finally turned out to be the most tough exam of the past 6-8yrs.

2) Portfolio Management Case Questions (IPS) - is a big section of the curriculum, comprising about 20-25% of the whole exam. We just can't afford to lose too many marks on this section. However, they are themselves of the "subjective and qualitative nature" that are difficult for us to prepare. A L3 candidate had made the following comment which is an accurate reflection of the IPS exam questions:

"I think in recent years questions are much less open-ended and have fallen into two types -- your ability to quickly summarize a number of details and make a judgment call (as in many IPS / PM Measurement and Attribution questions) or in your ability to recall some minor detail direct from the readings (economics/alternative assets).

I also think that the IPS questions are much lengthier, fuzzier, more data-oriented, and of less test "value" from a test-taker's perspective (less points for the amount of time needed to read, think, and answer). Alternative answers may have been quite acceptable in the past, but perhaps not any more since there are no alternative answers. Given the specificity of the Qs and the "case" preceding, often there is only one answer. This answer is perhaps elusive because of the multipilicity of issues involved, and because of time pressure. ....."

3) Only Focus on Past Exam Papers is Not a Strategy to pass the exam - The L3 curriculum kept changing in the past few yrs. Practising the past exam questions is not enough for our exam preparation as we actually have no old exam question to cover those newly added topics.

4) QM Text Bk -  One BIGGEST mistake I made, was that I chose not to buy the QM txt bk. QM was a newly added section for L3 in 2002, and Schweser gave VERY POOR presentation on the reading. An unexpected question on Time Series came up in the exam. I think most of us lost all the marks on that question (of course, except those math guys!).

5) Time pressure - The time crunch during the morning section is much worse than that of L2. Before the exam day, I always thought that I could handle the time pressure on L2 easily, and I would do the same on L3. But it turned out I blown out the morning section with some questions very poorly answered because of the time pressure.

2003:

(1) Schweser Notes +

(2) Read all the text bks and assigned readings (>2 times) +

(3) Did all the chapter-end practice questions of txt bks (>2 times) +

(4) Past Exam Papers (>2 times) +

(5) Write my own notes on those newly added readings +

(6) Schweser Pro CD testbank (for non-IPS topics) +

(7) Excel Practice Exam (>2 times)

With above study approach, I passed the L3. Given the exam was a lot easier in 2003, it seemed that I had "overdone" for the exam. I don't think we need to do all these study and in fact, we most likely don't have the time and energy to cover all these study materials. So I have picked up some critical elements of my study system that probably help u to pass the exam.

Study Hints

Since L3 is quite different from L2 in terms of their curriculum focus and exam questions style, u should be better to take a look on nature of the L3 exam, before scheduling your study plan.

Differences between the L2 and L3:

 L2
  • Focus on Asset Valuation and application of tools and inputs in asset valuation.

  • More quantitatively oriented.

  • Exam questions are more  "objective" in nature.

 L3
  • Focus on Portfolio Management and application of asset valuation models in managing investment portfolio for  individual and institutional investors.

  • More qualitatively oriented - about 20-25% of the exam questions involve writing investment policy statements (IPS) and applications of investment strategies in managing portfolio for a particular client.

  • Exam questions are more  "subjective" in nature.

Level of Difficulty do varies from yr to yr - Why I want to raise this point here? Some of those who failed in 2003 might think that the exam was not hard and they failed just because say, they don't have the time to study or pure bad luck, bala...ba...etc. Subsequently, they may not take it too serious again next yr. But I can tell u that the next exam may be a total different battle. When I compare the 2 yrs exam I took, I found that they are quite different in terms of difficulty level. Most of the candidates passed in 2002 would tell u that the L3 was a real tough exam. On ther hand, Many of the candidates failed in 2003 probably told u that the exam was easy (or fair). Actually we don't know what will come up in the exam, so study hard and prepare for a tough battle!

L3 passing rates:

2004 - 64%

2003 - 68%

2002 - 58%

2001 - 82%

2000 - 65%

1999 - 59%

Study Strategy

 Global Equity and Alternative Investments

10%

 Portfolio Management

 - Behavioral Finance

 - Individual Investors

 - Institutional investors

 - Asset Allocation  

 - Performance Evaluation & Attribution

 - GIPS  

 - Global Economics

40%

 Ethics 10%
 Quantitative Methods 10%
 Debt Securities 10%
 Derivatives 10%
 Risk Management 10%

1) Portfolio Management Case questions

".... the morning IPS questions (easily 20-25%) which are subjective anyway. You need to read both a concise summary *and* the readings in detail, paying attention to minutae. Your ability to correctly answer questions in the short time provided depends to a large extent on identifying what is being asked -- is it a pesky detail or is it checking on your ability to quickly summarize all the details and make a judgment call? Obviously, if you answer from the wrong perspective (detailed versus summarization), you are not going to get anything by way of credit. Plus, you also need to cite relevant evidence or provide *relevant* computations in your answer -- it is not enough if you simply say Mary Pierce needs a portfolio with a mix of income and capital appreciation -- you need to cite specifics from the case that support your position(s), plus do simple calculations with whatever assumptions you need to make to justify your call. Depending on the validity of your assumptions, you will get partial credits -- don't miss out on those. Also, your focus should be to complete the paper on time, and get as much partial credit scores as you can. Don't try to stretch too much for getting the full score, especially if it is at the risk of losing partial credit in other areas. "...comments from a candidate.

Given the qualitative nature of IPS questions, the presentations on the Port Mgt from study notes may not be enough to let u have a good understanding of the concepts. I strongly recommend u to focus on:

a) Tuttle's readings (L3 candidates readings)

b) Past exam questions

2) Non-IPS topics

U should focus on Chapter-end questions from assigned readings which are the most valuable sections of the text bks. I found that we can easily solve those real exam questions if you have done/studied well on these questions. U should note that Chapter-end questions from fixed income readings and QM are similar to those real exam questions in some ways.

3) Focus on Non-IPS topics that are more quantitatively oriented.

Traditionally, course providers emphasize that we should focus on Port Mgt case questions as they comprise about 25% of the whole exam. It is a big part! We can't afford to lose the section.

However, in past 2 yrs, I realised that no matter passed or not, very few candidates could score more than 50% on Port Management case questions. What made the difference bet pass or fail, is the performance on non-ips topics. Therefore, I have an assumption that we have a low chance to get a high scores on these port mgt questions even though we have studied hard on the relevant readings. If my assumption is right, we can only outperform other candidates by doing well on non-IPS topics.

( U can take a look on question 5 & 7 "Clair Pierce case"of 2002 exam paper. I think it is ridiculous to require a candidate to give the right ans within the time assigned given the complexity of the case.)

2) Text Bks u needed - focus on AIMR's own publications

a) L3 Candidates Readings

b) Quantitative Methods for Investment Analysis

c) Fixed Income Readings for L3

d) Analysis of Derivatives for the CFAR Program

 

4) GIPS - it comprises only about 5-8% of the exam. I suppose it is the only easy marks on L3. Past exam guidelines give us the glue to nail the GIPS questions.

5) Good Time Management on Morning Section is crucial.

6) Past Exam Questions - U should note that

a) no old questions on QM,

b) no old questions on "Risk beyond value at Risk",

c) few questions on Derviatves and Fixed Income, since the curriculum had changed quite a lot in the past few yrs.

d) use past exam questions as your study platform for Port Mgt questions and GIPS.

e) For those topics that were not covered by old questions, u should study well the assigned readings and the ch-end questions to fill the gaps.

7) Psychologically prepared for a tough battle on the exam day.

If U have any notes/study outlines, e-mail them to me. I will post them on the net for free download.

Comments or suggestions? Please e-mail me at normanhk01@yahoo.com.hk

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