Evaluating the Goodness of Fit of Stochastic Mortality Models

53 Pages Posted: 4 May 2009

See all articles by Kevin Dowd

Kevin Dowd

Nottingham University Business School (NUBS)

Andrew J. G. Cairns

Heriot-Watt University - Department of Actuarial Science & Statistics

David P. Blake

City University London - Cass Business School

Guy Coughlan

Pacific Global Advisors

David Epstein

J.P. Morgan Chase & Co.

Marwa Khalaf-Allah

J.P. Morgan

Date Written: April 28, 2009

Abstract

This study sets out a framework to evaluate the goodness of fit of stochastic mortality models and applies it to six different models estimated using English & Welsh male mortality data. The methodology exploits the structure of each model to obtain various residual series that are predicted to be iid standard normal under the null hypothesis of model adequacy. Goodness of fit can then be assessed using conventional tests of the predictions of iid standard normality. The models considered are Lee-Carter’s 1992 one-factor model, a version of Renshaw-Haberman’s 2006 extension of the Lee-Carter model to allow for a cohort effect, Currie’s 2006 age-period-cohort model, which is a simplified version of the Renshaw-Haberman model, the Cairns-Blake-Dowd 2006 two-factor model and two generalised versions of the latter that allow for a cohort effect. For the data set considered, there are some notable differences amongst the different models, but none of the models performs well in all tests and no model clearly dominates the others.

Keywords: goodness of fit, mortality models

Suggested Citation

Dowd, Kevin and Cairns, Andrew J. G. and Blake, David P. and Coughlan, Guy and Epstein, David and Khalaf-Allah, Marwa, Evaluating the Goodness of Fit of Stochastic Mortality Models (April 28, 2009). Available at SSRN: https://ssrn.com/abstract=1396205 or http://dx.doi.org/10.2139/ssrn.1396205

Kevin Dowd

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

Andrew J. G. Cairns

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

Edinburgh, Scotland EH14 4AS
United Kingdom

David P. Blake (Contact Author)

City University London - Cass Business School ( email )

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

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

Marwa Khalaf-Allah

J.P. Morgan ( email )

25 Bank Street
London, E14 5JP
United Kingdom

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