Every year while waiting for the results, candidates speculate on the pass rate. And every year, most candidates expect it to be lower than the past years.
And for good reason – the pass rates have been declining since… well, since the start, really. There is a general consensus within candidates and charterholders alike that the exams have been getting harder, and that’s probably a significant factor. I did some quick & dirty analysis this week & would like to offer an additional possibility:
The increase in CFA candidates is a significant factor in declining pass rates.
Comparing this with candidate volume, it seems that a possible significant factor is simply that more candidates are participating. Below is the number of candidates that took the exam over the same timeline. (Note: The dip in 2003 for Level I candidates is due to the introduction of the December exam)
Taking it a step further, below is the scatter chart of candidate numbers to pass rates year by year, and the corresponding R-squared values:
So while the increasing difficulty of the exams may well be a factor, it may simply be a function of the large candidate pool and decreasing average performance. I suppose this analysis doesn’t necessarily disprove that pass rates are causing the candidate increase – that the CFA Institute may be running a sinister conspiracy to lower the pass rates to encourage multiple retakes – hence increasing the candidate volume… but I doubt it.
What do you think – do you have your own theories & explanations? New harder topics being introduced, policies, marking systems? Let me know in the comments below!