  We identify a new type of risk, common firm-level investor fears, from
commonalities within the cross-sectional distribution of individual stock
options. We define firm-level fears that link with upward price movements as
good fears, and those relating to downward price movements as bad fears. Such
information is different to market fears that we extract from index options.
Stocks with high sensitivities to common firm-level investor fears earn lower
returns, with investors demanding a higher compensation for exposure to common
bad fears relative to common good fears. Risk premium estimates for common bad
fears range from -5.63% to -4.92% per annum.
