Tracking the Libor rate
AbstractWith an eye to providing a methodology for tracking the dynamic integrity of prices for important market indicators, in this article we use Benford second digit (SD) reference distribution to track the daily London Interbank Offered Rate (Libor) over the period 2005 to 2008. This reference, known as Benford's law, is present in many naturally occurring numerical data sets as well as in several financial data sets. We find that in two recent periods, Libor rates depart significantly from the expected Benford reference distribution. This raises potential concerns relative to the unbiased nature of the signals coming from the 16 banks from which the Libor is computed and the usefulness of the Libor as a major economic indicator.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 18 (2011)
Issue (Month): 10 ()
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Web page: http://www.tandfonline.com/RAEL20
Other versions of this item:
- Abrantes-Metz, Rosa & Villas-Boas, Sofia B. & Judge, George G., 2010. "Tracking the Libor rate," CUDARE Working Paper Series 1108R, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy, revised Jul 2010.
- Abrantes-Metz, Rosa & Villas-Boas, Sofia B. & Judge, George G., 2013. "Tracking the Libor Rate," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series, Department of Agricultural & Resource Economics, UC Berkeley qt2p33x7dk, Department of Agricultural & Resource Economics, UC Berkeley.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- George Judge & Laura Schechter, 2009. "Detecting Problems in Survey Data Using Benfordâ€™s Law," Journal of Human Resources, University of Wisconsin Press, vol. 44(1).
- Monticini, Andrea & Thornton, Daniel L., 2013.
"The effect of underreporting on LIBOR rates,"
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Elsevier, vol. 37(C), pages 345-348.
- Abrantes-Metz, Rosa M. & Kraten, Michael & Metz, Albert D. & Seow, Gim S., 2012. "Libor manipulation?," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 136-150.
- Samà, Danilo, 2014. "Cartel Detection and Collusion Screening: An Empirical Analysis of the London Metal Exchange," MPRA Paper 55363, University Library of Munich, Germany.
- Christoph Diehl, 2013. "The LIBOR mechanism and related games," Working Papers 482, Bielefeld University, Center for Mathematical Economics.
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