ABSTRACT
In this paper we compare and contrast modern finance ( the de facto dominant paradigm of financial economics) with what is usually called “behavioral finance” and occasionally called “the anomalies literature”. Those faithful to the dominant paradigm have in fact marginalized behavioral finance by making it the “anomalies literature”. But even the supposed proponents of behavioral finance are marginalizing themselves by clinging to the underlying tenets, forms, and methods of the dominant paradigm. They have allowed it to set the terms of the debate and made it the benchmark against which all finance is not only judged, but also labeled “finance”. But finance research itself is subject to the same “mistakes” that behavioral finance attributes to practitioners, and it is these same “mistakes”, perhaps more than the fierce attacks by the supporters of the ruling doctrine, that are preventing behavioral finance from emerging as a new paradigm. In effect, the failure of behavioral finance is proof of its veracity and legitimacy.
