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A Stochastic Investment Model for Actuarial Use in South Africa

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  • c{S}ule c{S}ahin
  • Shaun Levitan

Abstract

In this paper, we propose a stochastic investment model for actuarial use in South Africa by modelling price inflation rates, share dividends, long term and short-term interest rates for the period 1960-2018 and inflation-linked bonds for the period 2000-2018. Possible bi-directional relations between the economic series have been considered, the parameters and their confidence intervals have been estimated recursively to examine their stability and the model validation has been tested. The model is designed to provide long-term forecasts that should find application in long-term modelling for institutions such as pension funds and life insurance companies in South Africa

Suggested Citation

  • c{S}ule c{S}ahin & Shaun Levitan, 2019. "A Stochastic Investment Model for Actuarial Use in South Africa," Papers 1912.12113, arXiv.org, revised Jan 2021.
    • Handle: RePEc:arx:papers:1912.12113
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    References listed on IDEAS

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    1. Wilkie, A. D. & Åžahin, Åžule, 2017. "Yet more on a stochastic economic model: Part 3C: stochastic bridging for share yields and dividends and interest rates," Annals of Actuarial Science, Cambridge University Press, vol. 11(1), pages 128-163, March.
    2. Wilkie, A. D. & Åžahin, Åžule, 2019. "Yet more on a stochastic economic model: Part 5: a vector autoregressive (VAR) Model for retail prices and wages," Annals of Actuarial Science, Cambridge University Press, vol. 13(1), pages 92-108, March.
    3. Wilkie, A. D. & Şahin, Şule, 2017. "Yet more on a stochastic economic model: Part 3A: stochastic interpolation: Brownian and Ornstein–Uhlenbeck (OU) bridges," Annals of Actuarial Science, Cambridge University Press, vol. 11(1), pages 74-99, March.
    4. Wilkie, A. D. & Åžahin, Åžule, 2018. "Yet more on a stochastic economic model: Part 4: a model for share earnings, dividends, and prices," Annals of Actuarial Science, Cambridge University Press, vol. 12(1), pages 67-105, March.
    5. Wilkie, A. D. & Åžahin, Åžule & Cairns, A. J. G. & Kleinow, Torsten, 2011. "Yet More on a Stochastic Economic Model: Part 1: Updating and Refitting, 1995 to 2009," Annals of Actuarial Science, Cambridge University Press, vol. 5(1), pages 53-99, March.
    6. Thomson, Robert J. & Gott, Dmitri V., 2009. "Stochastic Models for Actuarial Use: The Equilibrium Modelling of Local Markets," ASTIN Bulletin, Cambridge University Press, vol. 39(1), pages 339-370, May.
    7. Wilkie, A. D. & Åžahin, Åžule, 2017. "Yet more on a stochastic economic model: Part 3B: stochastic bridging for retail prices and wages," Annals of Actuarial Science, Cambridge University Press, vol. 11(1), pages 100-127, March.
    8. Wilkie, A. D. & Åžahin, Åžule, 2016. "Yet more on a stochastic economic model: part 2: initial conditions, select periods and neutralising parameters," Annals of Actuarial Science, Cambridge University Press, vol. 10(1), pages 1-51, March.
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