Selection of Portfolios with Risky and Riskless Assets: Experimental Tests of Two Expected Utility Models *

Two expected utility models are considered for a multi-period portfolio selection task of a special nature: the generalized logarithmic and negative exponential models. A weak version of the models is formulated in which the single parameter of each of the models is allowed to vary freely from one period to another in order to account for observed individual differences between subjects as well as trial-to-trial variations within subjects. Employing parameter-free predictions, the models are tested experimentally with individual data from six different groups varying from one another in the savings or return rates. The experimental results refute the two models conclusively. Alternative approaches to model portfolio selection behavior are mentioned briefly.