Difference in behavior while using dynamic_cast with reference and pointers

Yes, this is correct behaviour. The reason is that you can have a null pointer, but not a null reference - any reference has to be bound to an object.

So when dynamic_cast for a pointer type fails it returns a null pointer and the caller can check for that, but when it fails for a reference type it can't return a null reference, so an exception is the only reasonable way to signal a problem.

See the C++ Standard, section 5.2.7/9:

9 The value of a failed cast to pointer type is the null pointer value of the required result type. A failed cast to reference type throws bad_cast (18.5.2).

As to why - these are Stroustrup's words from the D & E book, section 14.2.2:

I use a reference cast when I want an assumption about a reference type checked and consider it a failure for my assumption to be wrong. If instead I want to select among plausible alternatives, I use a pointer cast and test the result.