Tsunami hits Japan and some Japanese computer memory factories are shut down. As soon as this news hits America, the prices of computer memory chips is expected to go up. But there is a delay in how quickly different people hear the news. Some American memory chip sellers might still be selling at the old (lower) price, while some of their better-informed customers seize the opportunity to buy before the prices go up. In this instance, the sooner the news reach America, the American resellers know to increase their prices, and they get the benefit from the increased prices. (And some buyers end up paying more.)
Later, the Japanese have rebuilt and the factories are about to start producing again. Now memory chip prices are expected to go back down. The sooner the new information spreads around, the more people will benefit from buying at the cheaper prices. (And some resellers will disbenefit by having to decrease their prices sooner.)
The well-informed market makers keep the prices as current as possible.
Buyers benefit from new, cheaper prices, but sellers disbenefit. Or the other way round. But we believe that efficient markets are beneficial to society, so the benefit for whoever gains by buying/selling at the most recent price information is larger than whoever lost because they couldn't sell/buy at the old price.
Tsunami hits Japan and some Japanese computer memory factories are shut down. As soon as this news hits America, the prices of computer memory chips is expected to go up. But there is a delay in how quickly different people hear the news. Some American memory chip sellers might still be selling at the old (lower) price, while some of their better-informed customers seize the opportunity to buy before the prices go up. In this instance, the sooner the news reach America, the American resellers know to increase their prices, and they get the benefit from the increased prices. (And some buyers end up paying more.)
Later, the Japanese have rebuilt and the factories are about to start producing again. Now memory chip prices are expected to go back down. The sooner the new information spreads around, the more people will benefit from buying at the cheaper prices. (And some resellers will disbenefit by having to decrease their prices sooner.)
The well-informed market makers keep the prices as current as possible.
Buyers benefit from new, cheaper prices, but sellers disbenefit. Or the other way round. But we believe that efficient markets are beneficial to society, so the benefit for whoever gains by buying/selling at the most recent price information is larger than whoever lost because they couldn't sell/buy at the old price.