In 1950s, von Neumann and Morgenstein established a framework to analyze the choice of rational actors under uncertain conditions, namely the expected utility function theory. Arrow and Debru later developed and perfected the general equilibrium theory, which became the basis of economic analysis, thus establishing a unified analytical paradigm of modern economics. This paradigm has also become the basis for modern finance to analyze rational people's decision-making. 1952, markowitz published his famous paper "Portfolio Selection", which laid the foundation for modern portfolio theory and marked the birth of modern finance. Later, franco modigliani, Rihani and Miller established MM theorem, which initiated corporate finance and became an important branch of modern finance. In 1960s, Sharp and lintner established and expanded the capital asset pricing model. In 1970s, Ross established a more general arbitrage pricing theory (APT) based on the no-arbitrage principle. In 1970s, Fama formally expressed the Efficient Market Hypothesis (EMH) and Blake Scholes Merton established the option pricing model (OPM). So far, modern finance has become a discipline with strict logic and unified analytical framework.
However, a large number of empirical studies on financial markets in the 1980s found many abnormal phenomena that cannot be explained by modern finance. In order to explain these abnormal phenomena, some financial economists apply the research results of cognitive psychology to the analysis of investor behavior. By the 1990s, a large number of high-quality theoretical and empirical documents emerged in this field, forming the most dynamic school of behavioral finance. Matthew rabin, winner of Clark Prize in 20001year, and Daniel Kane Mann and Vernon Smith, winners of Nobel Prize in 2002, are both representatives in this field and have made important contributions to the basic theory in this field. Awarding these awards to experts in this field also shows that mainstream economics affirms this booming field and promotes the further development of this discipline. This field is called behavioral finance abroad, and it is called "behavioral finance" in most domestic documents and monographs.