O'Hare, Colin and Li, Youwei (2016): Modelling mortality: Are we heading in the right direction?

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Abstract
Predicting life expectancy has become of upmost importance in society. Pension providers, insurance companies, government bodies and individuals in the developed world have a vested interest in understanding how long people will live for. This desire to better understand life expectancy has resulted in an explosion of stochastic mortality models many of which identify linear trends in mortality rates by time. In making use of such models for forecasting purposes we rely on the assumption that the direction of the linear trend (determined from the data used for fitting purposes) will not change in the future, recent literature has started to question this assumption. In this paper we carry out a comprehensive investigation of these types of models using male and female data from 30 countries and using the theory of structural breaks to identify changes in the extracted trends by time. We find that structural breaks are present in a substantial number of cases, that they are more prevalent in male data than in female data, that the introduction of additional period factors into the model reduces their presence, and that allowing for changes in the trend improves the fit and forecast substantially.
Item Type:  MPRA Paper 

Original Title:  Modelling mortality: Are we heading in the right direction? 
Language:  English 
Keywords:  Mortality; stochastic models; structural breaks; forecasting 
Subjects:  C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C51  Model Construction and Estimation C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C52  Model Evaluation, Validation, and Selection C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C53  Forecasting and Prediction Methods ; Simulation Methods G  Financial Economics > G2  Financial Institutions and Services > G22  Insurance ; Insurance Companies ; Actuarial Studies G  Financial Economics > G2  Financial Institutions and Services > G23  Nonbank Financial Institutions ; Financial Instruments ; Institutional Investors J  Labor and Demographic Economics > J1  Demographic Economics > J11  Demographic Trends, Macroeconomic Effects, and Forecasts 
Item ID:  71392 
Depositing User:  Dr Youwei Li 
Date Deposited:  18 May 2016 14:02 
Last Modified:  18 May 2016 14:03 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/71392 