Factors that can affect the company’s working and the company’s stock performance shall be revealed in the stock prices of that company. Therefore, in an efficient market, the prices of the stocks and securities should represent the stock’s investment value. The investment value is the discounted value of the future earnings and expenses of the stock estimated by experienced analysts. A market works efficiently if it is efficient in providing information. The efficient market hypothesis relate to the informational efficiency. The informational efficiency refers to the efficiency where any change in price (either rise or fall) under some assumptions, would provide all the details and information of the concerned trading security.
An important factor that can bring a change in the prices of a company’s securities is the new information about the company. If new information about a company is spread, it would definitely affect the price of stocks of that company. Certainly the new information is sudden and unexpected, because if the information could have been predicted (the prediction is also a new information), then the prediction itself could bring changes in the prices of securities.