This paper studies the impact of the confirmatory bias on financial markets. Building on Rabin and Schrag (1999), we propose a model in which some traders may ignore new evidence when it is inconsistent with their favorite hypothesis regarding the state of the world. The confirmatory bias...

We study the impact of climate-related patent approvals on financial markets. We exploit the quasi-random assignment of patent examiners as an exogenous shock in patent approvals to seek for causal interpretations. We find that innovative firms with lucky draws in the patent examiner lottery...