Does the left-digit bias affect prices in financial markets?

According to the left-digit bias, people pay more attention to the leftmost digits of a number and tend to disregard the last digits of that number. We investigate whether this bias affects traders' perception and pricing in a large financial market trading foreign exchange options. Our theoretical model predicts that the left-digit bias affects prices, causing a discontinuous jump in expected returns when comparing markets at threshold prices 10, , 20, , ... , 90 with markets at prices just below these thresholds, such as 9 . 9 , 19.99, . 99, etc. The model predicts no discontinuity in returns among unbiased traders. Using a regression discontinuity approach over the returns of more than 1 million options, we find significant discontinuities in the expected returns, consistent with mispricing induced by the left-digit bias.