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Comparison of Individual Pension System and Bank's Deposit System for Low-Risk Investors

Author

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  • Özcan Mutlu
  • Muhammed Ordu
  • Olcay Polat

Abstract

The individual pension system (IPS) is an investment tool with regular payments that provides necessary savings for better live in retirement period. The demand for the IPS are substantially increased in recent years with the encouragements of the governments. In this study, revenues of bank’s deposit system (BDS) and IPS are compared for low-risk profile investors. For this reason, four scenarios are created and are evaluated for three different amounts of initial payment by using net present value and profitability index methods under both static and dynamic environments. Artificial neural networks and Monte-Carlo simulation approaches are used in creation of financial forecasts. As a result, while the BDS is more profitable for short-term investments, the IPS is clearly a more profitable investment for long-term investments in both static and dynamic environments.

Suggested Citation

  • Özcan Mutlu & Muhammed Ordu & Olcay Polat, 2016. "Comparison of Individual Pension System and Bank's Deposit System for Low-Risk Investors," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 4(2), pages 95-114, September.
  • Handle: RePEc:anm:alpnmr:v:4:y:2016:i:2:p:95-114
    DOI: http://dx.doi.org/10.17093/aj.2016.4.2.5000191707
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    More about this item

    Keywords

    Artificial Neural Networks; Bank's Deposit System; Individual Pension System; Investment Evaluation; Monte Carlo Simulation;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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