. We find that our implied volatility (IV) sentiment measure, jointly derived from index and single stock options, explains … behavioral bias is strongly time-varying, and is linked to equity market sentiment and higher moments of the risk-neutral density … investors' overweight of tail events well. When employed within a trading strategy, our IV-sentiment measure delivers …

-neutral density. An implied volatility (IV) sentiment measure that is jointly derived from index and single stock options explains … investors' overweight of tail events the best. Our findings also suggest that IV-sentiment predicts equity markets reversals … that this behavioral bias is strongly time-varying, linked to equity market sentiment, and higher moments of the risk …