CFA Level III — Portfolio Management & Wealth Planning

An analyst develops the following capital market expectations: US equities at 8% return with 16% volatility, European equities at 7% with 18% volatility, and US bonds at 3.5% with 5% volatility. She assumes 2.5% real GDP growth for the US and 1.0% for Europe, yet uses an identical equity risk premium of 5% for both regions. Which requirement of the CME framework has the analyst most likely violated?