European Journal of Molecular & Clinical Medicine ISSN 2515-8260 Volume 07, Issue 08, 2020 4300 Standard Finance And Behavioral Finance: A Study On It‟s Evolution And It‟s Present Status In India Anuradha Samal 1 and A K Das Mohapatra 2 1 Assistant Professor Department of Business Administration Sambalpur University, Odisha- 768019, India 2 Professor Department of Business Administration Sambalpur University, Odisha-768019, India E-mail : 1 samalanu@gmail.com, 2 akdm@suniv.ac.in Abstract The classical financial theories have been the base of finance since the mid 18 th century but in the past two and half decade there has been a paradigm shift in the field of financial from classical finance to a new field of finance named as Behavioral Finance. Behavioral Finance is an improvised form of standard finance models, concepts or theories by taking insights from sociology, neuroscience, law, psychology and organisation behaviour. This paper studies about the evolution of standard finance and behavioral finance and its present status in India. Keywords: Behavioral Finance, Evolution, 1. INTRODUCTION The central pillars of the classical finance theories were developed by Modigilani and Miller Arbitrage Principles, Markowitz Portfolio Theory, Sharpe‟s Capital Asset Pricing Model and Black Scholes Option Pricing theory and Eugene Fama‟s Efficient Market hypothesis (Dimson,1999). The common assumptions of these theories are: (i) markets are efficient, (ii) investors always take rational decisions, (iii) investor have access to market information (iv) investors have perfect self control. (Tseng, 2006)(Singh et al., 2019). But later these assumptions were challenged by the psychologists who argued that financial decisions are influenced by emotional biases and cognitive errors for which investors act in an irrational manner. (Nofsinger et al., 2007) The Behavioral Finance approach explains the reason behind the irrational behaviour of investors, especially why their behaviour doesnot match with the classical rationality framework. The below mentioned are few other reasons what classical finance theories couldn‟t explain which gave impetus for need of Behavioral Finance. 1) As per the classical finance theories, if the intrinsic price & market price of stock are almost same then why volatility exist? 2) What are the other factors than risk which affect stock return? 3) Why the volume of trading in the stock market is extremely high or low in some unexpected days resulting in bubble burst or market crash? (Froot,Obstfeld,1989)