Since the late 1980s, the research of behavioral finance theory has developed rapidly. Contrary to efficient market theory, the core argument of behavioral finance theory is that arbitrage in reality is not only full of risks, but also has limited functions. With the development of behavioral finance, many western scholars have conducted in-depth research on the limited arbitrage behavior of investors in the real market, and formed a wealth of limited arbitrage theories.

The theory holds that the market is imperfect, investors are irrational, and the incentive and restraint mechanism is imperfect, which limits the arbitrage behavior of arbitrageurs and cannot completely or even correct the deviation of market prices. Assuming that the problem of asset substitution is not considered, these factors can be divided into two categories: time constraint and capital constraint from the nature that the arbitrage behavior of arbitrageurs is restricted (that is, limited arbitrage).

Time constraint means that it takes longer for the relevant asset price to return to its basic value than for the arbitrageur to buy and sell the asset, which makes the arbitrageur have to sell or buy the relevant asset before the price returns to the basic value level.

Capital constraint means that due to the limitation of capital scale, when the arbitrageur is faced with arbitrage opportunities (the asset price is lower than its basic value), he can't buy the relevant assets of the expected scale. For general arbitrageurs, capital constraints may come from credit rationing; For professional arbitrageurs, financial constraints may come from the withdrawal of ordinary investors-for example, for open-end fund managers, if their past performance is not good, they may face redemption from fund investors.