How do prices behave in an efficient market when new information is released?

In an efficient market, when new information is released, prices move almost immediately to reflect that information. This behavior is grounded in the Efficient Market Hypothesis (EMH), which posits that asset prices fully incorporate all available information at any given time. As soon as new information becomes public, whether it's positive or negative, traders analyze its implications and adjust their buy or sell orders accordingly. This rapid adjustment helps ensure that the price of an asset reflects its true value based on the most current information available.

In essence, the immediate response in pricing maintains the integrity of the market's efficiency, as no information advantages can persist for long periods. Investors are continuously seeking to capitalize on new information, leading to swift changes in price as buy and sell orders flood in upon the release of that information.