First, review the
CFA Program Candidate Body of Knowledge (CBOK). Reflecting on your work in the course and the knowledge, skills, and abilities required of a finance professional, address the following in a journal entry:
Competencies: Which of the competencies or attributes of the CBOK do you believe you excel at personally? Briefly describe.
Challenges: Which of the competencies pose challenges to you, and how might you overcome those challenges?
Application: How do you see yourself applying these competencies to your own career goals in finance?
Be sure to reference the CBOK document and refer to any other course resources to support your responses.
The CFA Program Candidate Body of KnowledgeTM: The Past Decade, 2000–2010 Thomas R. Robinson, PhD, CFA, CFP, Managing Director–Education, CFA Institute Christopher B. Wiese, CFA, Director–Candidate Products, CFA Institute The Candidate Body of Knowledge The CFA Program Candidate Body of Knowledge (CBOK) represents the core knowledge, skills, and abilities (competencies) that are generally accepted and applied by investment professionals throughout the world. In practice, these competencies are used in a generalist context and are expected to be demonstrated by a recently qualified CFA charterholder. The CBOK is depicted graphically in Exhibit 1. The CBOK is determined through a practice analysis process whereby members and employers provide information on current practice as well as anticipated future trends and the competencies that a new CFA charterholder needs in order to practice in the investment profession. This process is described in more detail in The CFA Program: Our Fifth Decade, available here. The current CBOK consists of four components: • A broad topic outline that lists the major knowledge areas (see Exhibit 2)1 ; • Topic area weights that indicate the relative exam weightings of the top-level topic areas (see Exhibit 3)2 ; • Learning outcome statements (LOSs) that advise candidates as to what they should be able to do with this knowledge (LOSs are provided in candidate study guides3 and at the beginning of each reading) ; and • The curriculum of material that candidates receive upon exam registration and are expected to master. Because the CBOK changes over time, the curriculum used in the CFA Program today differs quite a bit from the one used ten years ago. This article describes those changes and provides a resource for charterholders to refresh their knowledge on current topics. A major feature of the current curriculum is that more than half of it was written by prominent practitioners and academics on the basis of CFA Institute’s practice analysis. CFA Institute has repackaged this material into a series of texts that can be used by members, societies, and universities to refresh their own knowledge, provide refresher courses, or educate potential CFA Program candidates. Appendix A contains a list of available texts. Overall Evolution of Topic Areas and Weights 1Because the CBOK evolves over time, topics and weights may change. This list is current as of the publication of this article. The current version is available here. 2The current version is available here. 3The current versions are available here. http://www.cfainstitute.org/programs/cfaprogram/Documents/the_cfa_program_our_fifth_decade.pdf http://www.cfainstitute.org/programs/cfaprogram/courseofstudy/Pages/cbok.aspx http://www.cfainstitute.org/programs/cfaprogram/exams/Pages/exam_topic_area_weights.aspx http://www.cfainstitute.org/programs/cfaprogram/courseofstudy/Pages/study_sessions.aspx The major topics listed in Exhibit 2 (e.g., Ethical and Professional Standards, Quantitative Methods, etc.) have evolved slightly from 2000 to 2010. The relative weighting of these topics in the CFA Program from 2000 to 2010 is provided in Exhibit 3. These ten knowledge domains can be categorized into four broad areas: Ethical and Professional Standards, Investment Tools, Asset Classes, and Portfolio Management and Wealth Planning. Ethical and Professional Standards has been a core of the CBOK and curriculum from the program’s inception in 1962. Although the overall focus in this area has not changed over time, the CFA Institute Code and Standards content has evolved. In Exhibit 3, note that the overall topic weights assigned to ethics (15 percent at Level I, 10 percent at Level II, and 10 percent at Level III) also remained constant over the period. With regard to Investment Tools, the areas of Accounting and Corporate Finance comprised one major topic domain in 2000. Shortly thereafter, the practice analysis process determined that corporate finance was of increasing importance to new charterholders, and accordingly corporate finance was elevated to a top-level topic domain. Similarly, the focus on accounting over the past 10 years gave way to financial statement analysis and then to financial reporting and analysis, reflecting a shift in focus to analysis of all of a company’s financial reports beyond just the financial statements themselves. Further, by 2010 a greater focus was placed on International Financial Reporting Standards (discussed in the next section). With respect to topic weights, by 2010 the Investment Tools topic areas were no longer given specific target weights at Level III; economics, however, was assigned to be tested as part of portfolio management and the remaining tools areas provide the background for evaluation of the asset classes at Level III. The relative weights for financial reporting and corporate finance were increased over the past decade, primarily to reflect the greater importance of corporate finance. With regard to Asset Classes, the focus was shifted from general theory to application to specific asset classes. In 2000, the asset classes listed at the top level of the CBOK topic outline were equity investments, fixed-income investments, and alternative investments. Derivative instruments were listed at a lower level. Early in the decade, investments in derivatives were elevated to one of the top-level topic domains; thus, the current topic outline includes four main asset classes: equity investments, fixed-income investments, derivatives, and alternative investments. Over the decade, the topic weights for the asset classes were increased at all levels, which reflects the increased use of derivatives and alternative investments. Note that individual weights were not provided for each asset class until 2007. During the decade, the domain of Portfolio Management was retitled Portfolio Management and Wealth Planning. This change reflects a continuous evolution toward more private-wealth content in the CBOK and curriculum. Portfolio management for individual investors was included in the CBOK in 2000, however, because of a shift in the marketplace (e.g., from defined-benefit plans to defined-contribution plans); the importance of managing investments for individuals as opposed to institutions has steadily increased. Evolution of Individual Topic Areas: 2000–2010 This section discusses the major changes in the content of the CBOK and curriculum across all three levels of the curriculum during the past decade. Appendix B shows the major changes by exam level for the period 2000–2010. Ethical and Professional Standards The major changes during the decade were the introduction of a new edition (the ninth) of the Standards of Practice Handbook and the introduction of the Asset Manager Code of Professional Conduct.4 The ninth edition of the Standards of Practice Handbook contains the code of ethics and related standards. The Asset Manager Code of Professional Conduct (second edition) presents the ethical responsibilities of firms that manage client assets. In addition, the CFA Institute Research Objectivity Standards were added as a required reading. The most significant change was in the area of performance presentation standards. The new Global Investment Performance Standards replaced the AIMR Performance Presentation Standards. The Global Investment Performance Standards (2005) provide standards for the presentation of fair and objective investment results. During the decade, performance standards were moved to the Portfolio Management and Wealth Planning section of the study guides. Quantitative Methods Although the basic topics in this area have not changed over the decade, the readings, which were based on business statistics, were replaced with custom-written material on the investment management industry. This material is found at Levels I and II and has been republished in the second edition of Quantitative Investment Analysis, by DeFusco, McLeavey, Pinto, and Runkle (see Appendix A). Economics Although the readings were updated frequently, the core concepts remained largely unchanged over the decade. Some material on economic fluctuations, unemployment, and inflation, which was listed as preliminary readings (not tested) in 2000, was moved into the main economics study sessions. Information on such financial institutions as central banks was added. At Level III, the focus was shifted from economic forecasting to economic concepts for valuation. Financial Reporting and Analysis This area changed significantly over the decade. The 2000 study guide contained recommended preliminary readings that included information on the accounting cycle (including debits and credits) and other topics. Further, the U.S. Generally Accepted Accounting Principles (GAAP) was a primary focus, with some mentions of the International Financial Reporting Standards (IFRS). The past decade 4See Appendix A for a list of the publications mentioned in this article and for links to their locations on the CFA Institute website. CFA Centre publications are available for free download. Sample chapters of many of the other publications are available for free download. saw a continuous trend toward more analysis topics and fewer pure accounting topics, together with a shift to a strong focus on IFRS, consistent with a global trend toward IFRS and harmonization of accounting standards. By 2010, there were no preliminary readings (but some basic optional material was included in the assigned readings), and the readings were based primarily on IFRS. U.S. GAAP is still presented, not as a primary focus, but rather in the context of a candidate’s ability to understand and adjust for differences in global accounting standards. Moreover, new readings about analyzing cash flows and detecting financial reporting irregularities were added. As accounting standards changed, the readings were also changed significantly in content and were moved toward a fair value concept for many assets and liabilities. This new material has been republished in International Financial Statement Analysis, by Robinson, van Greuning, Henry, and Broihahn (see Appendix A). Corporate Finance As previously noted, this area was elevated in importance and weight over the decade. In particular, corporate finance material on capital budgeting, capital structure, and dividend policy was added at Level II. Readings on corporate governance were added at Level I. One currently required reading is The Corporate Governance of Listed Companies: A Manual for Investors, which provides information on how to assess a company’s governance policy. Other readings at Levels I and II of the current curriculum have been republished in Corporate Finance: