Leverage measures how far an observation is from the average value of the independent variable. High leverage observations are those that are far away from the average and have a large effect on the regression line.
For a particular independent variable, leverage of a particular data point measures the distance between its value and the mean value of that variable. Leverage is normalised between 0 and 1. High leverage points may have a leverage factor closer to 1, while low leverage points are closer to 0. The higher the leverage, the more influence it can potentially exert on the estimated regression. A useful rule of thumb is that if the leverage measure exceeds this value, then it is a high leverage point and is potentially influential.
Many years ago, I was exactly where you are today—a CFA Level I candidate juggling a demanding full-time career with the daunting CFA curriculum. Coming from a Computer Engineering background, finance was entirely new territory for me. And yes, it was tough!
I struggled with dense textbooks, late-night cramming, and the frustration of concepts that seemed impossible after a long workday. But after passing Level I (barely), I realized something had to change.
Studying Smarter, Not Harder
Using the Pareto Principle (80/20 rule), I distilled the vast CFA syllabus into essential, easy-to-understand nuggets. I leaned into visual summaries and bite-sized learning sessions that worked around my busy schedule. This smarter approach helped me clear Levels II and III on my first attempts with significantly less stress.
Why PrepNuggets?
I founded PrepNuggets to share the streamlined strategies and innovative learning methods that transformed my CFA journey. Our mission is simple: leverage technology to make CFA prep more effective, accessible, and enjoyable.
Join the PrepNuggets community today—sign up for your free account, and let our thoughtfully crafted materials propel you toward CFA success without unnecessary overwhelm.
Here’s to your CFA journey!
Keith Tan, CFA
Founder & Chief Instructor, PrepNuggets
About the Author
PrepNuggets
Keith is the founder and chief instructor of PrepNuggets. He has a wide range of interests in all things related to tech, from web development to e-learning, gadgets to apps. Keith loves exploring different cultures and the untouched gems around the world. He currently lives in Singapore but frequently travels to share his knowledge and expertise with others.
