1. Bad News Inc. just announced a decrease in its quarterly earnings, yet stock price increased. Is there a rational explanation for the phenomenon? (20 points) 2. Which of the following phenomena would be either consistent with or a violation of the efficient market hypothesis? Explain briefly. (10 points each) (A) Fund managers who outperform the market (on a risk-adjusted basis) in one year are likely to outperform in the following year (B) Stock prices tend to be predictably more volatile in January than in other months (C) Stocks that perform well in one week perform well in the following week