Subject weights for CFA level III exam for last 4 years



The .xls file for the weights can be downloaded from here: cfa-level-iii-exam-weights.

I have compiled the data from the last 4 years’ CFA level III exam. The important points to notice from the data analysis are given below:

Ethics: No two ways about it. If you want to maximize your probability of success, you need to study it from the curriculum. You will get 10% from Ethics and it will be in the afternoon paper and thus it is even more important. Because if you know the areas in the afternoon exam, you will get full marks for that. That may not be true for the morning exam.

Private Wealth + Behavioral Finance: Total of 16-20% will come from this area and behavioral finance would be only 2-4% of it. This is the area that would give you the least return for your time investment as it is time-consuming to study it and there are high chances to get the answers to the questions wrong for this subject. For this topic, practicing last 4-5 years’ actual CFA exam morning exams would be sufficient. No need to waste more time on this area as the returns are less likely to be good.

Institutional Investors: 
The weight of Institutional Investors is most likely to be around 9% i.e. around 32 marks in the morning exam. Since there are only two small chapters in ‘Institutional Investors’ subject, it is extremely important to focus on this area to maximize your score. It is most likely to give you the best returns for your time. The second chapter, though very small, is also important and in last few years, CFA exam setters have asked few questions from that chapter as well. You are more likely to find only essay based questions from this topic.

Economic Analysis: Two chapters are there in this area: Capital Market Expectations and Equity Market Valuation. Most of the questions would be formula based numerical from this area and this is a high scoring area. One item set from one chapter would come in the morning exam and in the evening exam, it would be from the second chapter. You may want to revise the formulas of that chapter in the time gap between the morning and afternoon exam.

Asset Allocation:
This topic is sometimes mixed with the private wealth case. You need to focus more on the currency portion of the topic. You are more likely to get questions from that chapter. The weight of this chapter is less and is not a good time investment.

Fixed Income: One of the most important area and also one of the easiest topics in CFA level III curriculum. The average weight of this topic has been closer to 12%. It is very important to revise all the three chapters on this topic. It is most likely to be asked in both morning and afternoon exams. Most of the questions would be formula based. You should be good with your formulas and concepts to score well in this area.

Equity: Only one chapter and weight of around 7%. It would also give you the best return on your time investment. Revise it 2-3 times and do not get any question wrong. Most of the questions would be theoretical and conceptual. So, two three times revision is very important.

Alternative Investments: Generally, the weight would be around 5% only. The average weight is 6.4% because CFA Institute gave more focus to it in 2013 and they asked 10% of it both in CFA level II and CFA level III in that year. But after that, the weight in the exam had been again closer to 5% only. Only one chapter is there and also it is a very easy read. You shouldn’t lose any point from it because it is most likely to be asked in the afternoon exam.

Risk Management And Derivatives: A total of 11-12% from this area. There is one chapter of risk management and three chapters of Derivatives (futures/forwards, options, swaps). It is a conceptual topic. Questions would be both conceptual and numerical. It is one of the areas where you can score even full marks in the essay exam. You must score well in this area.

Trading, Monitoring, and Rebalancing: Around 4-5% from this topic. A very easy topic but a relatively newer one for the candidates as nothing of this has been discussed in the earlier levels of CFA. The question would either be in the morning exam or in the afternoon exam. Generally, if they ask this area in the morning exam then they are going to ask the next chapter (Performance Evaluation) in the afternoon exam.

Performance Evaluation: Very similar weights as that of the Trading and Rebalancing. The good thing is that the concepts are very easy for these two topics and if proper time is spent then 9-10% marks are there to pocket in from these areas. Revise these two areas again as you are more likely to forget concepts from these two topics than the other topics.

GIPS: They did not ask any item set from it in the 2014 and 2016 exam but asked questions in 2013 and 2015. They might ask questions from it again this year as well. You should not skip it. It is one of the easiest areas to score full marks. If you study this chapter from the curriculum book and do the 40 odd end of chapter questions from the book, you are more likely to score 6 out of 6 from this area. The questions will be not dicey like Ethics from this area. The questions will be straightforward and it is very easy to score 6/6 in this topic.



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A blog of the NYU Colloquium on Market Institutions and the Leipzig Colloquium on the Market Order

Fundoo Professor

Thoughts of a teacher & practitioner of value investing and behavioral economics

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