Toronto – At the end of this week, tens of thousands of hopeful, sleep-deprived candidates around the world will sit exams for the coveted designation of Chartered Financial Analyst.
Is it worth it? A new study shows analysts with the CFA designation issue timelier financial forecasts than those without the credential. They also tend to be bolder and more objective in those forecasts. But the study also found CFA charterholders were average in terms of their forecasting accuracy – perhaps because other analysts had the advantage of observing the forecasts issued by CFA charterholders before writing their own.
"I think the results are in line with expectations," says co-author Gus De Franco, an accounting professor at the University of Toronto's Rotman School of Management. "The results prove that there's value in the CFA charter and people who are taking the CFA program are being rewarded, at least in part."
Prof. De Franco also found that those who hold the CFA credential gave timelier forecasts even before obtaining the designation. Afterward, this only improved. These results are signs that CFA charterholders have a natural, innate edge on talent as well as acquire additional skills through the studying and program preparation process.
Prof. De Franco researched and wrote the study with former Rotman graduate student, Professor Yibin Zhou, now at the University of Texas at Dallas. Although few studies have been done of the CFA designation, their paper represents the largest published study to date that examines analysts working on the "sell-side" (i.e., for brokerage firms or investment banks) where their reports are usually publicly-available.
To earn the CFA charter, financial professionals must pass a series of three, sequentially-leveled exams, must have at least four years of acceptable investment-related professional work experience, and must join and comply with the policies of the CFA Institute – a global, not-for-profit association of investment professionals.
Demand for the credential is strong, with 82,000 CFA charterholders, in134 countries and territories, as of 2008. This compares to 10,000 charterholders in 1990. U.S. regulators have even awarded CFA charterholders special status when it comes to qualification exams.
The complete study is available at: www.rotman.utoronto.ca/newthinking/CFA.pdf.
For the latest thinking on business, management and economics from the Rotman School of Management, visit www.rotman.utoronto.ca/NewThinking.
The Rotman School of Management at the University of Toronto is redesigning business education for the 21st century with a curriculum based on Integrative Thinking. Located in the world's most diverse city, the Rotman School fosters a new way to think that enables the design of creative business solutions. The School is currently raising $200 million to ensure Canada has the world-class business school it deserves. For more information, visit www.rotman.utoronto.ca.
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