Tracking the Libor Rate

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

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: 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.

Keywords: Social and Behavioral Sciences; Life Sciences; market rate data; Libor; Benford’s law; second digit distributions (search for similar items in EconPapers)
Date: 2013-03-11
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Working Paper: Tracking the Libor Rate (2011)
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