Arbitrage trading of various stripes occurs throughout the day and does not typically move the market. But there are non-arbitrage trading programs that trade extremely large blocks of stock, based on various criteria, without a hedge. These kinds of trades will tend to move the market. The opportunities for these market raids are identified by pre-programmed computers and the positions are executed by traders set to strike quickly and efficiently when all the prerequisites are in place, with the entire procedure often taking no longer than a few seconds. It is highly specialized short-term trading executed on a massive scale.
Fair value is actually unimportant in practical terms.
There s a great deal of program trading in today s market. Program trading takes place in a wide range of markets, because of the close relationships between the stock, index futures and index options markets. These trading programs affect the market in a variety of ways. Some days a small program might only move the Dow up or down 40 points. Some days a large sell program can drop the Dow over 100 points very fast.