[bizaro86]

Originally Posted by Enoch Root

If the information is available, and is relatively easy to analyze and determine a new valuation point, then the price of the shares will instantly jump to the new price (or thereabouts).

Let's say, for simple math, that AMZN was worth $100, with previously expected earnings of $10/share. Then, they come out and say that earnings will be $8/share, and they don't expect that to change any time soon. The simple analysis here says the stock should drop 20% to $80.

Okay, so you're wanting to buy AMZN and you were waiting for the news. Before it came out, you might have been prepared to buy at $100 (or at a price reflective of what you expected the earnings to look like). But now, it is clearly only worth $80. So why would you buy at $99 or $98 or $97... the answer is you wouldn't. Any orders that you might have on the books, you would remove and you would put in a new order at $80.

This is how it works (overly simplistically). Sure, there would be a few people who's orders weren't removed, and sellers would immediately jump on them. But the market would almost immediately drop to $80, because that is where the bids would be.

No rational person would buy at price X, if they think the price is going to soon be less than X. Decide what price makes sense, and buy there. That is why markets drop quickly.

Yeah, the idea that 5 minutes is quick for a large cap with big news to adjust is very wrong. 5 seconds is more realistic. Plenty of programmatic traders analyzing news flows with AI and auto-trading on the info to try and get a speed advantage. Although after hours is definitely slower/less liquid