1. Starting with the 1995 exam, the CFA® Institute has discontinued the publication of actual past exams. Candidates pledge not to reveal the contents of the exam and the creators are, of course, bound to secrecy. No one who is free to give advice about the upcoming exam has perfect knowledge of the contents of the three most recent exams.
   
   Each candidate should have purchased Readings including 2005 Sample Exams. The questions from those exams are included in this ExamSaver software system. However, it is likely that the sample exams, of which these are the third annual set, are diverging from reality year by year. Fewer than 10% of the questions in the 2005 sample exams are changed from the 1999 sample exams. Our assumption is that the actual 2005 exam will evolve from the 1999 to a greater degree than that.
   
2. The CFA® Institute has cut back the required Readings significantly in the past couple of years. The decision to do so was reasonable; the scope of the Readings had grown to what some considered an unmanageable size.
   
   The consequence has certainly not been to "dumb down" the curriculum, but it has been to make it a little more coherent and interesting. Some of the discontinued Readings were basic background. Without them, it is more difficult to understand how the many elements of this broad and rich body of knowledge fit together. By adhering more closely to the overall scheme that Level 1 focuses on "tools and concepts" while Level II focuses on "asset valuation" and Level III focuses on "portfolio management", the CFA® Institute has removed from the Level 1 curriculum some of the structure that held the curriculum together and helped it to make sense to the student. What has been kept is "how to use the tools", but more and more of "what the tools are used for" have been held back for Level II.
   
   Of more immediate importance to us is the problem that the pruning of the Readings makes it more difficult to forecast what the exam will emphasize. Many of the "All-Time Favorite" questions now have less support in the Readings than they once did. So, will the CFA® Institute abandon many of the all-time favorites, heavily represented in the 1999 Sample Exams? If so, what will take their place?
   
   A number of possibilities need to be considered. Questions calling for broad conceptual understanding may be replaced in some cases by questions calling for memorization of narrowly focused details from the Readings. Some Topics may be significantly de-emphasized; one possible example is Derivatives. Or the examiners may react to the narrowing of the Readings by retaining questions about broad concepts which "the candidate ought to know", even if their coverage in the Readings has been reduced or eliminated entirely.
   
   What are the implications for the candidate? A shift from broad to narrow questions will call for more memorization of details. A de-emphasis of some Topics will call for more attention to Readings about which the CFA® Institute has published few or no questions in the past. An insistence that "the candidate ought to know" the broad concepts would make it particularly important to study questions from past exams and sample exams.
   
   In our Topic-by-Topic advice below, we offer suggestions for how the candidate might consider these possibilities in studying each separate part of the curriculum.
   
3. The third change, which makes it harder to predict where the exam will go, is the introduction of Learning Outcome Statements in 1997. They are clearly a helpful addition to the study materials. The candidate can use them to focus studying and to check retention of key facts and concepts.
   
   So, what is the problem? The Learning Outcome Statements are much more focused than the Candidates Body of Knowledge Outline--until recently the most complete statement of learning objectives. Isn't that a good thing? The problem is that we do not know the extent to which the introduction of the Learning Outcome Statements has modified the exam.
   
   No exam given since the LOS’ were introduced has been made public. If we reason from the sample exams, which have been published, we would assume that little has changed. If you performed a painstaking comparison of exam questions published by the CFA® Institute with the Leaning Outcome Statements published by the CFA® Institute, as we have done, you would find a surprisingly high level of mismatches. Some published questions do not fit easily into any of the Statements, and many Statements (and entire Readings, for that matter) are not covered at all in the recent Sample Exams. Where a mismatch exists, will the 2005 Exam look more like past exams or more like the Learning Outcome Statements? We do not know, but we do offer Topic-by-Topic advice.
   
   It is possible that the CFA® Institute will attempt to apply the LOS approach to the exam by spreading the questions more broadly and thinly and paying at least token attention to almost every Learning Outcome Statement. While there will be some shift in this direction, we expect that it will be limited.

We have examined three things, which the CFA® Institute has done: (1) it has stopped releasing actual Exams, (2) it has modified the Required Readings and (3) it has introduced Learning Outcome Statements. Our suspicion is that there may be neither perfect coordination nor a complete meeting of the minds among the people responsible for each of the three changes. The crucial question is what role was played by each of these three mindsets in developing the 2005 Exam. The one thing of which we are most confident is that no single mindset was completely dominant in designing the exam. So, it is important to pay close attention to the actual and sample exams, which the CFA® Institute has published. Even though the body of questions is standing almost still (the CFA® Institute added only 20 new questions to the 2005 Sample Exams), the CFA® Institutes thinking has probably not evolved too far from this traditional base. 600+ of our questions are from the CFA® Institute exams. If you understand those questions and understand the underlying concepts well enough to handle similar, reworded questions, you are well on your way to mastering the Level 1 Body of Knowledge and passing the exam.

Finally, it is important to keep the Learning Outcome Statements in mind. To the extent that they suggest a shift toward under-emphasized Topics and toward more detail-oriented questions, the questions added by ExamSaver will be particularly helpful. We do not recommend that your study be based principally upon the Learning Outcome Statements. Many of the statements look like they have been included in the interest of completeness rather than because of they’re importance. We think that inertia will make the 2005 Exam look more like past ones than like an exam intended to touch all the LOS bases.


Focusing Your Study

ExamSaver is a study aid and exam preparation tool. It is not intended to replace the Readings, the CFA® Institute Study Guide, the seminars, or other tutorial products. It is to be used in conjunction with them to help you focus and apply what you are learning. We think that the analysis that we have done of past and sample CFA® Institute exams can help you to focus that study effort. To that end we offer our ranking of the Study Sessions and Required Readings in terms of importance and then provide specific suggestions on learning each of the Topics.


Ranking of the Topics

We have developed a model to predict the weight that the exam will give to each of the Topics, the Study Sessions and the Readings, based upon the weightings in the CFA® Institute Study Guide, the actual distribution of questions in past exams and the emphasis implied by the choices of Required Readings and the Learning Outcome Statements. Following are our estimates of the weighting likely to be given to each of the major Topic areas on the exam:

In particular, we think that Asset Valuation and Portfolio Management will be given more weight than CFA® Institute suggests. Markets and Instruments should receive less emphasis than CFA® Institute suggests. The CFA® Institute has consistently predicted a higher emphasis upon this Topic than it has provided on the Level 1 exam. Furthermore, for reasons explained below we predict more emphasis this year upon Global issues, including those imbedded in some of the other six Topics.


Ranking of the Study Sessions

Not all Study Sessions are created equal. This is obvious when you see the CFA® Institute suggesting a 15% weight for Quantitative Methods, with only one Study Session, versus 10% for Portfolio Management, which has three.