CFA Level 2 Exam – 21 Week Study Plan, Part 2 of 6

Introductory Remarks – see part 1

General Guidelines – see part 1

Week 2 – Quant

I believe that many candidates let themselves get unnecessarily stressed about Quant.  Keep in mind it is a minor part of test.

Topics include: correlation, significance testing, single and multiple variable regression, assumptions and violations in regression analysis, and time series modeling.

If you have worked with an SPSS or other stats software, then think about how CFAI might create an item set using the data report from a regression or time series analysis.  Can you interpret the results?  Can you fill in the blanks on any missing calculations?

Ultimately, do not let all the nuances of what is basically MBA level statistics get you down.  If this isn’t your bag, focus on more heavily tested sections.

Week 3 – Economics

Like Quant, Econ is one of the lower weighted sections, but there’s a catch.  The economics of foreign exchange rates appear elsewhere in Level 2 and on Level 3.  So keep this in mind as you work through Econ.

Topics include: general macroeconomics, national income accounting, principles of international trade, and foreign exchange rates.  You could get an item set incorporating one or all of these concepts.

Week 4 – Financial Statements, Part 1

The next three weeks are Financial Statements and this is mission critical material for the serious Level 2 candidate.  Learn it, live it, love it!

This week’s material includes inter-corporate investments, accounting for acquisitions, variable interest entities (VIEs), and the impact that accounting methods for these actions have on financial ratios.  Watch out for differences in IFRS and US GAAP.  If CFAI mentions both, then they reserve the right to test on both.

You could see an entire item set on one or some combination of all of the topics in the preceding paragraph.  So be prepared.  Use a build up approach in developing proficiency.  Start by working through problems with your notes and flash cards in front of you and keep working through problems until you can do them without assistance.  It will take time.

Week 5 – Financial Statements, Part 2

Now you move into accounting for pensions and employee retirement benefits, stock based compensation, and consolidation of multinational operations with emphasis on currency translation accounting.

You could realistically see one item set on pension accounting and a separate item set on consolidation of multinational subsidiaries.  Again, note the nuances between IFRS and US GAAP.  Same approach as FSA 1, start working problems with your notes and gradually build proficiency.

Series NavigationCFA Level 2 Exam – 21 Week Study Plan, Part 1 of 6CFA Level 2 Exam – 21 Week Study Plan, Part 3 of 6

Tags: , , , ,

7 Responses to “CFA Level 2 Exam – 21 Week Study Plan, Part 2 of 6”

  1. jenikcarl February 2, 2012 at 7:02 am #

    Hi, you have a pretty solid plan in place.
    I was wondering if you could tell me how important it is to know the Level 1 material before starting preparation for the Level 2 material. My recollection of Level 1 is faint at best and I do not wish to waste time floundering in Level 2 prep if it requires Level 1 revision.

    • admin February 2, 2012 at 7:06 am #

      You can directly start with Level 2 prep. While there are a lot of similarities with the Level 1, you should be good with the Level II material, as you will go through the Level II AIMS and the material.

      • jenikcarl February 2, 2012 at 11:30 am #

        Thanks for the quick response. I did start off with the Quants Reading on Correlation. I’ll post here if I do find the need to go back to Level 1 for revision. Just for the sake of clarification, AIMS, is it similar to the CFA LOS?

        • admin February 6, 2012 at 5:58 am #

          Yes, I actually meant LOS. Looking forward to what you feel about revisions.

  2. Chad James February 2, 2012 at 11:38 am #

    jenikcarl -

    I wrote the L2 study plan on Finance Train (note that it is now dated by a couple of years, but still directionally valid).

    To your first post, I would say that you can go ahead and dive right into to Level 2. During my L2 journey, I referenced L1 a couple of times, but not often. Just have the L1 books nearby so you can reference as needed.

    As for L2 Quant specifically, you will largely find yourself focusing on modeling methods (cross sectional and time series regression) and examining models for validity. Correlation analysis is a pre-cursor to simple least squares regression. The biggest link between L1 and L2 Quant is understanding confidence intervals, but your L2 books should have all you need for the second exam on this matter.

    Regards,
    Chad

  3. Chad James February 7, 2012 at 5:14 am #

    I was able to pass all three exams without reading a single LOS and would not recommend getting bogged down by them. This is where the beneift of doing many, many practice questions and several mock exams comes into play. CFAI weights its topics and allocates question counts accordingly. By doing questions and mock exams a test taker gets a feel for what will be tested and how to successfully navigate that material. CFAI does not test the exact wording of LOS, rather it tests the concepts and applications behind them.

  4. linusjf December 23, 2012 at 6:24 am #

    Thanks for the tips. It’s a great study plan to adapt.
    Wrt the quant, how important is it in your work??? Or not???

Leave a Reply