Black-Scholes Formula: Objective or Risk-Neutral?

[pkxt]

Hello,

I understand that the normal distribution is used to model stock returns in the Black-Scholes formula.

Can someone please tell me whether this is meant to be the subjective probability distribution or the risk-neutral probability distribution?

Thank you!

 

[BWV]

risk neutral (assuming prices are continuous & the underlying can be sold short without limit)

 

[pkxt]

Thank you for your response! Can you perhaps point me to some academic sources?

I read something that claims the implied volatility is an estimate of the variance of the subjective probability of asset return -- is that just because they are not drawing the distinction between subjective and risk-neutral?