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Mortality density forecasts: An analysis of six stochastic mortality models

  • Cairns, Andrew J.G.
  • Blake, David
  • Dowd, Kevin
  • Coughlan, Guy D.
  • Epstein, David
  • Khalaf-Allah, Marwa

This paper develops a framework for developing forecasts of future mortality rates. We discuss the suitability of six stochastic mortality models for forecasting future mortality and estimating the density of mortality rates at different ages. In particular, the models are assessed individually with reference to the following qualitative criteria that focus on the plausibility of their forecasts: biological reasonableness; the plausibility of predicted levels of uncertainty in forecasts at different ages; and the robustness of the forecasts relative to the sample period used to fit the model. An important, though unsurprising, conclusion is that a good fit to historical data does not guarantee sensible forecasts. We also discuss the issue of model risk, common to many modelling situations in demography and elsewhere. We find that even for those models satisfying our qualitative criteria, there are significant differences among central forecasts of mortality rates at different ages and among the distributions surrounding those central forecasts.

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Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

Volume (Year): 48 (2011)
Issue (Month): 3 (May)
Pages: 355-367

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Handle: RePEc:eee:insuma:v:48:y:2011:i:3:p:355-367
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505554

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  1. Carter, Lawrence R. & Lee, Ronald D., 1992. "Modeling and forecasting US sex differentials in mortality," International Journal of Forecasting, Elsevier, vol. 8(3), pages 393-411, November.
  2. Robert McNown & Andrei Rogers, 1989. "Forecasting Mortality: A Parameterized Time Series Approach," Demography, Springer, vol. 26(4), pages 645-660, November.
  3. Brouhns, Natacha & Denuit, Michel & Vermunt, Jeroen K., 2002. "A Poisson log-bilinear regression approach to the construction of projected lifetables," Insurance: Mathematics and Economics, Elsevier, vol. 31(3), pages 373-393, December.
  4. Luc Bauwens & Genaro Sucarrat, 2008. "General to specific modelling of exchange rate volatility : a forecast evaluation," Economics Working Papers we081810, Universidad Carlos III, Departamento de Economía.
  5. Edouard Debonneuil, 2010. "A simple model of mortality trends aiming at universality: Lee Carter + Cohort," Papers 1003.1802, arXiv.org.
  6. Rob J. Hyndman & Md. Shahid Ullah, 2005. "Robust forecasting of mortality and fertility rates: a functional data approach," Monash Econometrics and Business Statistics Working Papers 2/05, Monash University, Department of Econometrics and Business Statistics.
  7. Andrew J. G. Cairns & David Blake & Kevin Dowd, 2006. "A Two-Factor Model for Stochastic Mortality with Parameter Uncertainty: Theory and Calibration," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(4), pages 687-718.
  8. Dowd, Kevin & Cairns, Andrew J.G. & Blake, David & Coughlan, Guy D. & Epstein, David & Khalaf-Allah, Marwa, 2010. "Evaluating the goodness of fit of stochastic mortality models," Insurance: Mathematics and Economics, Elsevier, vol. 47(3), pages 255-265, December.
  9. Julia Campos & Neil R. Ericsson & David F. Hendry, 2005. "General-to-specific modeling: an overview and selected bibliography," International Finance Discussion Papers 838, Board of Governors of the Federal Reserve System (U.S.).
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