IDEAS home Printed from https://ideas.repec.org/p/asb/wpaper/201212.html
   My bibliography  Save this paper

Rethinking Age-Period-Cohort Mortality Trend Models

Author

Listed:
  • Daniel Alai

    (ARC Centre of Excellence in Population Ageing Research, Australian School of Business, University of New South Wales)

  • Michael Sherris

    (School of Risk and Actuarial Studies and ARC Centre of Excellence in Population Ageing Research, Australian School of Business, University of New South Wales)

Abstract

Longevity risk arising from uncertain mortality improvement is one of the major risks facing annuity providers and pension funds. In this paper we show how applying trend models from non-life claims reserving to age-period-cohort mortality trends provides new insight in estimating mortality improvement and quantifying its uncertainty. Age, period, and cohort trends are modelled with distinct effects for each age, calendar year, and birth year in a generalized linear models framework. The effects are distinct in the sense that they are not conjoined with age coefficients, borrowing from regression terminology, we denote them as main effects. Mortality models in this framework for age-period, age-cohort, and age-period-cohort effects are assessed using national population mortality data from Norway and Australia to show the relative significance of cohort effects as compared to period effects. Results are compared with the traditional Lee-Carter model. The bilinear period effect in the Lee-Carter model is shown to resemble a main cohort effect in these trend models. However the approach avoids the limitations of the Lee-Carter model when forecasting with the age-cohort trend model.

Suggested Citation

  • Daniel Alai & Michael Sherris, 2012. "Rethinking Age-Period-Cohort Mortality Trend Models," Working Papers 201212, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
    • Handle: RePEc:asb:wpaper:201212
    as

    Download full text from publisher

    File URL: http://cepar.edu.au/media/79136/11_rethinking_age-period-cohort_mortality_trend_models.pdf
    File Function: First version, 2012
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Su, Shu & Sherris, Michael, 2012. "Heterogeneity of Australian population mortality and implications for a viable life annuity market," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 322-332.

    More about this item

    Keywords

    Mortality Modelling; Age-Period-Cohort Models; Generalized Linear Models; Lee-Carter Models;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:asb:wpaper:201212. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Elena Capatina (email available below). General contact details of provider: https://edirc.repec.org/data/ceparau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.