In the context of "if equity returns follow forward", what exactly does "follow forwards" mean?
Thank you!
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1$\begingroup$ Where does this quote come from? $\endgroup$– LocalVolatilityDec 28, 2017 at 20:54
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in this context it probably means that over time equity spot will move towards the forward.
For example: at t0 the spot S(t0) = 100, and assume divs are 0 and rate is 1%. Then the 1y forward would be 100*exp(0.01*1).
If spot would follow the forward, then after 6months the spot would have to be 100*exp(0.01*0.5).
