Tracking the Libor rate
With 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.
|Date of creation:||May 2010|
|Date of revision:||Jul 2010|
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- 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.
- 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.
- Tam Cho, Wendy K. & Gaines, Brian J., 2007. "Breaking the (Benford) Law: Statistical Fraud Detection in Campaign Finance," The American Statistician, American Statistical Association, vol. 61, pages 218-223, August.
- 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), pages -.
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