Expected Information vs Unexpected Information

In an efficient market, prices react mainly to unexpected information.

If investors already expect a particular result, that expectation may already be included in the asset price. Therefore, when the expected result is announced, the price may not move much.

But if the actual result is better or worse than expected, the price may change significantly.

Example:
Suppose investors expect a company to report a profit of ₹100 crore. Based on this expectation, the stock is already trading at ₹800.

Now there are three possible outcomes:

1. Company reports profit of ₹100 crore
   The stock price may not change much because the result was expected.
2. Company reports profit of ₹130 crore
   The stock price may rise because the profit is ₹30 crore higher than expected.
3. Company reports profit of ₹70 crore
   The stock price may fall because the profit is ₹30 crore lower than expected.

This shows that market prices respond more strongly to surprise information than expected information.