CFA Level II Exam – LOS Changes 2013

The level II exam has seen some pretty big changes since last year. Several readings have been removed and the replacement readings appear a little more general in concept. This could be good news for candidates but make sure you are up to date on all the changes.
There are two types of changes to the Learning Outcome Statements within the curriculum that the Institute regularly implements. Candidates retaking the exams or coming back to the exams after a hiatus need to be aware of LOS changes and plan accordingly.

  • Wording changes are rarely material or worth too much consideration. These are the most minor changes and usually involve a change from something like “characterize” to “describe” or “explain” to “interpret”. The material does not change and you still need to learn the same ideas.
  • Additions and deletions are much more important. Occasionally, these will be from existing readings but more typically it will involve a change to the readings as well. Those retaking an exam may want to spend a little more time on the new sections to bring themselves up where they are in other topic areas. Those returning to the exams after a multi-year hiatus need to be aware of changes across the exams because often the Institute will move curriculum around in the three levels.

The readings in Economics have been completely changed though the actual ideas and concepts you will come across are the same. The three new readings: Currency Exchange Rates, Economic Growth and the Investment Decision, and the Economics of Regulation bring 30 new LOS and wording changes to seven others. We’ll try to hit the topic in a little more detail within the blog to make sure you are on track.
Three readings have been removed from the Equity topic area though study sessions 10 and 11 remain intact as valuation concepts and industry analysis. The reading on valuation in Emerging Markets has been removed and the exam looks like it is placing less emphasis on the EM space. A total of 13 LOS were removed from the topic with a few additions and minor wording changes.
The General Principles of Credit Analysis reading has been replaced with Fundamentals of Credit Analysis in the Fixed Income topic. Looking at the old and new LOS, it seems like the change is pretty immaterial and the focus of the material remains on general credit analysis.
The Derivatives topic area seems a little more general with the replacement of Using Credit Derivatives to Enhance Return and Manage Risk with a new reading, Credit Derivatives: An Overview.
The readings on Investment Analysis and Income Property Analysis in Alternative Investments have been replaced with Private Real Estate Investments and Publicly Traded Real Estate Securities. It seems the topic is moving away from a general approach to alternative investments to focus more on details within each option.
The curriculum dropped two readings, one on Markowitz’s Market Efficiency and one on International Asset Pricing, from the Portfolio Management topic area. Sixteen LOS have been removed with no additions. The quantitative material in Portfolio Concepts is a tough one for many candidates and the introduction to the Portfolio Management Process is extremely important when you get to the third exam. Spend a little more time on this scaled-back topic area.
Towards the end of this week, we will cover a couple of general strategies for different study personalities. Next week, we will start our study plan covering each study session within each level exam. Let me know if you have any questions, suggestions or if you are having difficulty with any particular topic.
‘til next week, happy studyin’
Joseph Hogue, CFA

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