1. Reverse Stock Splits Are Classified as Stock Dividends
Curriculum location: Dividends, Share Repurchases, and Stock Splits, Stock Dividends, Stock Splits, and Reverse Splits, p. 82.
“Specific forms of stock dividends include stock splits and reverse stock splits.”
The curriculum defines a stock dividend as a distribution of shares, yet later defines a reverse stock split as a reduction in shares outstanding. Similar proportional effects on price and ownership do not make a share consolidation a dividend distribution.
Correct reading: A stock dividend distributes shares. A forward stock split subdivides shares, while a reverse stock split consolidates them. A reverse stock split is not a form of stock dividend.
This distinction prevents candidates from confusing a distribution with a share-count consolidation when classifying corporate actions.
2. The Bid–Ask Spread Is Counted Twice
Curriculum location: Dividends, Share Repurchases, and Stock Splits, Stock Dividends, Stock Splits, and Reverse Splits, p. 82.
“a trader showing a bid–ask spread of USD0.03 per share for a company stock trading at USD4.00 may discourage investors due to the relatively high cost to acquire and subsequently sell shares”
“The same USD0.03 spread for a USD1,000 share price results in just a charge”
Earlier in the same volume, Module 3 defines the bid–ask spread as the lowest ask minus the highest bid and uses that full difference as the cost measure for buying and then selling. An immediate purchase at the ask followed by a sale at the bid therefore crosses the full quoted spread once; multiplying it by two double-counts the round-trip cost.
Correct reading: The approximate round-trip spread costs are for the USD4.00 share and for the USD1,000 share.
Using the printed method would systematically overstate spread costs and distort comparisons of trading frictions across share prices.
3. T+2 Does Not Create a Two-Business-Day Ex-Date Gap
Curriculum location: Dividend Payment Chronology, dividend payout process, p. 85.
“If an equity trade settlement takes two days, usually there is a two-day gap between the ex-dividend date and the record date, ensuring all transactions made before the ex-dividend date are settled by the record date.”
The module’s own Exhibit 2 places the ex-dividend date one day before the record date, and its Question Set 2 solution says the ex-dividend date typically occurs one business day before the record date. The printed sentence confuses the T+2 interval from the last dividend-entitled trade with the shorter interval from ex-date to record date.
Correct reading: Under the T+2 convention described, the last dividend-entitled trade normally occurs two business days before the record date, while the ex-dividend date normally occurs one business day before the record date.
Keeping these dates distinct prevents candidates from shifting the ex-date and dividend-entitlement cutoff by one business day.
4. The Tech Mahindra Residual Has the Wrong Sign
Curriculum location: Dividend Payment Chronology, Tech Mahindra Ex-dividend Date Stock Return, p. 87.
Solving the curriculum’s displayed equation gives approximately , not . A positive residual would make the displayed decomposition equal , so it cannot reproduce the observed decline.
Correct reading: Using the curriculum’s displayed rounded components, the company-specific change is ; using the underlying unrounded price and index inputs, it is approximately .
The corrected sign preserves the direction of the company-specific shock and reinforces that residual return components must be solved with their signs intact.
5. Normalized Index Levels Are Treated as Returns
Curriculum location: Equity Total Return, Total Equity Returns Versus Price-Only Returns: A Global Comparison, p. 93.
“the Indian NSE NIFTY 50 Index rose by over .”
“the CAC 40 increased over while the NIFTY 50 increased by well over .”
Curriculum location: Equity Total Return, Exhibit 7 discussion, p. 94.
“By dividing the price index amount by the total return index amounts shown in Exhibit 7, we can isolate the pure price appreciation component of the holding period return.”
“Doing so for the NIFTY 50 shows that of the 20-year holding return is strictly from price appreciation.”
“The remaining of returns reflect the effects of reinvested dividends on the total returns of the NIFTY 50.”
“By contrast, the CAC 40 has generated only of its returns from pure price appreciation.”
“Reinvested dividends provide the other of the CAC 40 total returns.”
Exhibit 7 normalizes every series to a base of 100. A terminal level must therefore be reduced by 100 before it is expressed as a cumulative percentage return. The same base must also be removed from both price and total-return series before attributing the cumulative return between price appreciation and reinvested dividends.
Correct reading: The cumulative returns are for the NIFTY price index, for the NIFTY total return index, and for the CAC total return index. Price appreciation represents of the NIFTY cumulative return and of the CAC cumulative return; the respective reinvested-dividend portions are and .
Subtracting the normalized base before computing return and contribution prevents candidates from overstating cumulative performance and misallocating the sources of long-run return.
Complete Module 4 Errata Index
Scope: Module 4, pp. 75–104 (printed page numbers).
What this review covers. Errors in the printed curriculum that would change a candidate's answer or understanding: wrong numbers, wrong formulas, reversed logic, and statements that contradict the module's own data. It does not list spelling mistakes, equation-numbering slips, or wording that is loose but defensible.
The table below lists all high-value, objectively confirmed curriculum errors covered by this article, including eligible errors in printed Practice Problems and their solutions. Repeated instances of the same defect are consolidated into one row. Import-only defects, question errors not printed in the module source, disputed or reasonably defensible claims, and low-value editorial corrections such as typos or numbering and cross-reference errors are outside scope.
References
- Investor.gov: Stock Split
- Investor.gov: Reverse Stock Splits
- Investor.gov: Ask Price
- FINRA Regulatory Notice 17-19: T+2 Settlement Cycle
This article is an independent candidate-focused analysis of confirmed errors in the CFA Level I 2027 Curriculum, Volume 5 Equity Investments, Module 4 Sources of Equity Returns. It is not an official CFA Institute errata notice, and inclusion here must not be read as CFA Institute confirmation, endorsement, or approval.