CFA Level 1 Equity Investments Study Guide
Master market organization, equity valuation models, and industry analysis with 230+ practice questions and detailed explanations.
Equity Investments Topic Breakdown
Key Equity Investments Concepts
Master these fundamental concepts that appear regularly on the CFA Level 1 exam
Dividend Discount Models
HighGordon growth and multi-stage DDM calculations
Market Efficiency
HighWeak, semi-strong, and strong form efficiency
P/E Ratios & Multiples
MediumPrice multiples and their determinants
Industry Analysis
MediumPorter's Five Forces and competitive analysis
How to Ace CFA Level 1 Equity Investments
Master Valuation Model Hierarchy
DDM builds from Gordon growth to multi-stage. FCFE and FCFF models are alternatives. Know when to apply each and understand the assumptions.
Understand Market Efficiency
The three forms of market efficiency are heavily tested. Know what type of information each form incorporates and be ready to identify anomalies.
Practice Multi-Stage Models
Multi-stage DDM questions are common. Practice calculating terminal value, normalizing earnings, and transitioning between growth stages.
Porter's Five Forces
Industry analysis questions often use Porter's framework. Understand each force's impact on industry profitability and be ready to apply it.
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Equity Investments FAQs
How much of the CFA Level 1 exam is Equity Investments?
Equity Investments represents 11-14% of the CFA Level 1 exam, making it one of the most heavily weighted topics. This translates to approximately 20-25 questions out of 180 total questions.
What equity valuation methods do I need to know?
Focus on dividend discount models (Gordon growth, multi-stage), free cash flow to equity, and price multiples (P/E, P/B, EV/EBITDA). Understand when each is appropriate.
What is the most difficult Equity topic?
Most candidates find multi-stage dividend discount models and the relationships between different valuation multiples challenging.