Evaluating the performance of the Lee-Carter method and its variants in modelling and forecasting Malaysian mortality

Abstract

This study investigated the performance of the Lee-Carter (LC) method and it variants in modeling and forecasting Malaysia mortality. These include the original LC, the Lee-Miller (LM) variant and the Booth-Maindonald-Smith (BMS) variant. These methods were evaluated using Malaysia’s mortality data which was measured based on age specific death rates (ASDR) for 1971 to 2009 for overall population while those for 1980–2009 were used in separate models for male and female population. The performance of the variants has been examined in term of the goodness of fit of the models and forecasting accuracy. Comparison was made based on several criteria namely, mean square error (MSE), root mean square error (RMSE), mean absolute deviation (MAD) and mean absolute percentage error (MAPE). The results indicate that BMS method was outperformed in in-sample fitting for overall population and when the models were fitted separately for male and female population. However, in the case of out-sample forecast accuracy, BMS method only best when the data were fitted to overall population. When the data were fitted separately for male and female, LCnone performed better for male population and LM method is good for female population.