IDEAS home Printed from https://ideas.repec.org/a/taf/uaajxx/v15y2011i1p13-31.html
   My bibliography  Save this article

Structural Changes in the Lee-Carter Mortality Indexes

Author

Listed:
  • Johnny Li
  • Wai-Sum Chan
  • Siu-Hung Cheung

Abstract

In recent years mortality has improved considerably faster than had been predicted, resulting in unforeseen mortality losses for annuity and pension liabilities. Actuaries have considered various models to make stochastic mortality projections, one of which is the celebrated Lee-Carter model. In using the Lee-Carter model, mortality forecasts are made on the basis of the assumed linearity of a mortality index, parameter kt, in the model. However, if this index is indeed not linear, forecasts will tend to be biased and inaccurate. A primary objective of this paper is to examine the linearity of this index by rigorous statistical hypothesis tests. Specifically, we consider Zivot and Andrews’ procedure to determine if there are any structural breaks in the Lee-Carter mortality indexes for the general populations of England and Wales and the United States. The results indicate that there exists a statistically significant structural breakpoint in each of the indexes, suggesting that forecasters should be extra cautious when they extrapolate these indexes. Our findings also provide sound statistical evidence for some demographers’ observation of an accelerated mortality decline after the mid-1970s.

Suggested Citation

  • Johnny Li & Wai-Sum Chan & Siu-Hung Cheung, 2011. "Structural Changes in the Lee-Carter Mortality Indexes," North American Actuarial Journal, Taylor & Francis Journals, vol. 15(1), pages 13-31.
    • Handle: RePEc:taf:uaajxx:v:15:y:2011:i:1:p:13-31
    DOI: 10.1080/10920277.2011.10597607
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/10920277.2011.10597607
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10920277.2011.10597607?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

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


    Cited by:

    1. Reese, Simon, 2015. "Asymptotic Inference in the Lee-Carter Model for Modelling Mortality Rates," Working Papers 2015:16, Lund University, Department of Economics.
    2. Blake, David & Cairns, Andrew J.G., 2021. "Longevity risk and capital markets: The 2019-20 update," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 395-439.
    3. Li, Johnny Siu-Hang & Liu, Yanxin, 2021. "Recent declines in life expectancy: Implication on longevity risk hedging," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 376-394.
    4. Man Chung Fung & Gareth W. Peters & Pavel V. Shevchenko, 2017. "Cohort effects in mortality modelling: a Bayesian state-space approach," Papers 1703.08282, arXiv.org.
    5. Colin O’hare & Youwei Li, 2017. "Modelling mortality: are we heading in the right direction?," Applied Economics, Taylor & Francis Journals, vol. 49(2), pages 170-187, January.
    6. Wang, Pengjie & Pantelous, Athanasios A. & Vahid, Farshid, 2023. "Multi-population mortality projection: The augmented common factor model with structural breaks," International Journal of Forecasting, Elsevier, vol. 39(1), pages 450-469.
    7. Hong Li & Johnny Siu-Hang Li, 2017. "Optimizing the Lee-Carter Approach in the Presence of Structural Changes in Time and Age Patterns of Mortality Improvements," Demography, Springer;Population Association of America (PAA), vol. 54(3), pages 1073-1095, June.
    8. Man Chung Fung & Gareth W. Peters & Pavel V. Shevchenko, 2016. "A unified approach to mortality modelling using state-space framework: characterisation, identification, estimation and forecasting," Papers 1605.09484, arXiv.org.

    More about this item

    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:taf:uaajxx:v:15:y:2011:i:1:p:13-31. 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/uaaj .

    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.