We dissect the impact of information contained for future asset returns in the implied volatility skew. Future returns are linked to the discrepancy between call and put volatilities of at-the-money options and to the left side of the volatility skew, calculated as the difference between...

Prior literature shows that the implied volatility spread between call and put options is a bullish signal for future returns on the underlying stocks. A common interpretation is that a high call-put implied volatility spread indicates favorable private information revealed by informed option...

Behavioral theories contend that the human decision-making process tends to both incorporate anchor points and improperly weight low probability events. In this study, we find evidence that equity option market investors anchor to prices and incorporate a probability weighting function similar...