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Tracking the Libor rate

Rosa Abrantes-Metz, Sofia Villas-Boas () and George Judge

Applied Economics Letters, 2011, vol. 18, issue 10, pages 893-899

Abstract: With 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.

Date: 2011
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Working Paper: Tracking the Libor Rate (2013) Downloads
Working Paper: Tracking the Libor rate (2010) Downloads
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