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A Quantitative Comparison of Stochastic Mortality Models Using Data from England & Wales and the United States

77 Pages Posted: 11 Feb 2009  

Andrew J. G. Cairns

Heriot-Watt University - Department of Actuarial Science & Statistics

David P. Blake

City University London - Cass Business School - The Pensions Institute

Kevin Dowd

Nottingham University Business School (NUBS)

Guy Coughlan

Pacific Global Advisors

David Epstein

J.P. Morgan Chase & Co.

Date Written: March 2007

Abstract

We compare quantitatively eight stochastic models explaining improvements in mortality rates in England &Wales and in the US. On the basis of the Bayes Information Criterion (BIC), we find that an extension of the Cairns, Blake & Dowd (2006b) model that incorporates the cohort effect fits the England & Wales data best, while for US data, the Renshaw & Haberman (2006) extension to the Lee & Carter (1992) model that also allows for a cohort effect provides the best fit. However, we identify problems with the robustness of parameter estimates of these models over different time periods. A different extension to the Cairns, Blake & Dowd (2006b) model that allows not only for a cohort effect, but also for a quadratic age effect, while ranking below the other models in terms of the BIC, exhibits parameter stability across different time periods for both data sets. This model also shows, for both data sets, that there have been approximately linear improvements over time in mortality rates at all ages, but that the improvements have been greater at lower ages than at higher ages, and that there are significant cohort effects.

Keywords: Stochastic mortality, CBD-Perks models, Lee-Carter models, age effect, period effect, cohort effect, maximum likelihood, Bayes Information Criterion, robustness

Suggested Citation

Cairns, Andrew J. G. and Blake, David P. and Dowd, Kevin and Coughlan, Guy and Epstein, David, A Quantitative Comparison of Stochastic Mortality Models Using Data from England & Wales and the United States (March 2007). Available at SSRN: https://ssrn.com/abstract=1340389 or http://dx.doi.org/10.2139/ssrn.1340389

Andrew J. G. Cairns (Contact Author)

Heriot-Watt University - Department of Actuarial Science & Statistics ( email )

Edinburgh EH14 4AS Scotland
United Kingdom

David P. Blake

City University London - Cass Business School - The Pensions Institute ( email )

London, EC2Y 8HB
Great Britain
+44 (0) 20-7040-5143 (Phone)
+44 (0) 20-7040-8881 (Fax)

Kevin Dowd

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

Guy Coughlan

Pacific Global Advisors ( email )

535 Madison Avenue
Floor 14
New York, NY 10022
United States
+1-212-405-6340 (Phone)

HOME PAGE: http://www.PacificGlobalAdvisors.com

David Epstein

J.P. Morgan Chase & Co. ( email )

60 Wall St.
New York, NY 10260
United States

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