Tracking the Libor rate
AbstractWith an eye to providing a methodology for tracking the dynamic integrity of prices for important market indicators, in this paper we use Benford second digit reference distribution to track the daily London Interbank Offered Rate (Libor) over the period 2005-2008. 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 sixteen banks from which the Libor is computed and the usefulness of the Libor as a major economic indicator.
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Bibliographic InfoPaper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1108R.
Length: 15 pages
Date of creation: May 2010
Date of revision: Jul 2010
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Postal: University of California, Giannini Foundation of Agricultural Economics Library, 248 Giannini Hall #3310, Berkeley CA 94720-3310
Other versions of this item:
- 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 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.:
- David E. Giles, 2005.
"Benford’s Law and Naturally Occurring Prices in Certain ebaY Auctions,"
Econometrics Working Papers
0505, Department of Economics, University of Victoria.
- David Giles, 2007. "Benford's law and naturally occurring prices in certain ebaY auctions," Applied Economics Letters, Taylor & Francis Journals, vol. 14(3), pages 157-161.
- George Judge & Laura Schechter, 2009. "Detecting Problems in Survey Data Using Benford’s Law," Journal of Human Resources, University of Wisconsin Press, vol. 44(1).
- Andrea Monticini & Daniel L. Thornton, 2013.
"The effect of underreporting on LIBOR rates,"
2013-008, Federal Reserve Bank of St. Louis.
- 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.
- Christoph Diehl, 2013. "The LIBOR mechanism and related games," Working Papers 482, Bielefeld University, Center for Mathematical Economics.
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