Goal: To forecast life expectancy at birth to 2020 in the United Kingdom.

Available Data: (United Kingdom) Y Variable (To be forecasted) 1. Life expectancy at birth from 1952 to 2008. X Variables (Dependent) 1. Infant mortality rate (per 1000 births) from 1952 to 2008 2. Income per person from 1952 to 2008 3. Death rate (per 1000 people) from 1960 to 2008 4. Health expenditure from 1995 to 2008 Requirements: To forecast the Life expectancy at birth in the UK till 2020 we will need to forecast the future values of the available dependent data (X variables) so as to accurately fit our forecasted Y values. We do this by two methods: 1. ACE Regression 2. HOLT Smoothing Method Future values from a method giving the best possible fit statistic value are selected to further predict the life expectancy at birth in the UK. 1. Descriptive Analysis ACE Model As observed in the below line plots for ACE functions of Infant mortality rate, Income per person, Death rate and Health expenditure we can visually observe that the forecasted future values fit the available data with appropriate RMSE values. We later carry out the HOLT forecasts and find the best possible method by comparing respective RMSE values. Additionally, ACE residuals for all the dependent variable forecasts are scattered without showing any distinct pattern implying removal of any in-built error correlations within the series. This implies that the ACE correlation in each case was successful.

Infant Mortality Rate

As expected the Infant Mortality is linearly declining with time and follows the same trend in to the future.

No observable error correlations among the available ACE data while the forecasted variables show a distinct pattern. The pattern is an effect of the future values adapting to the long-term trend within the ACE model.

Income per person

As observed the Income per person linearly increases with time and follows the same trend in to the future.

The ACE residuals are completely random, implies no error correlations exist.

Death Rate

As observed, the Death Rate remains nearly constant up till 1977 after which a slow yet steady decline is observed till year 2000 after which it appears to be stabilized with a potential dip in the future. We can speculate a linearly declining business cycle.

The ACE residuals are completely random, implies no error correlations exist. Health Expenditure

As observed, the ACE forecast for Health Expenditure does not fit the Health Expenditure current values completely which is also reflected in its high RMSE value. This resultant difference in fit can be attributed to the lack of availability of data before the year 1995. Moreover, a linearly increasing trend is observed. This is trend is not reflected in the future values to a large extent. This variation can be a result of forecasted values tending to trend as a result of lack of historical data.

The ACE residuals are completely random, implies no error correlations exist. HOLT Smoothing As observed in the ACE Model, no seasonality exists in the dependent variable analysis. Linear trend is observable in all the time plots. Based on the above requirements, it is fair to apply HOLT smoothing techniques to forecast the future X values in expectancy of improved fit statistics. Infant Mortality Rate

Infant Mortality is linearly declining with time and has a better fit

characteristics

Error is not completely random with some observable correlations. We can assume it those to be an anomaly. Income per person

As observed the Income per person linearly increases with time with better fit statistics and RMSE value.

The HOLT residuals are completely random, implies no error correlations exist. Death Rate

As observed, the Death Rate adjusts to a more linearly declining state implying a better fit to the predominant trend as against the ACE model. Implies improved fit statistic for the HOLT model.

The HOLT residuals are completely random, implies no error correlations exist.

Health Expenditure

As observed, the HOLT forecast for Health Expenditure is linearly

increasing. It fits the Health Expenditure current values as compared to the previous model. Modeling using the internal structure of the data helps us overcome the lack of in-depth historical data.

The HOLT residuals are completely random, implies no error correlations exist. Comparison & Conclusion: ACE v. HOLT

2.

Looking at the tabulated Root Mean Square Error values for forecasted X variables for both ACE and HOLT models, we can see that HOLT Model is the clear winner with much lower RMSE values.
RMSE ACE HOLT Infant Mortality Rate (per 1000 births) Income per person ($) Death Rate (per 1000 ppl) Health Care Expenditure ($)

0.277292923 0.205308183

341.840555 2 337.322801 7

0.331129625 0.237977949

21348.3487 10454.9865 8

We consider the forecasted X (= Infant Mortality Rate/ Income per person/ Death Rate/ Health Care Expenditure) values from 2008 - 2020 to forecast the required life expectancy at birth to the best possible fit later in the report.