(16 points) Consider two stocks traded in the market: stock A and stock B. Stock A has a correlation of 0.5 with the market and its volatility is twice as high as that of the market portfolio. Stock B is uncorrelated with the market and its volatility is equal to that of the market portfolio.

a. (6 points) Firms A and B both announced earnings on the same day; both stocks rose by 5% that day, as did the market portfolio. Assuming no other news related to stocks A and B were announced that day, which stock more likely exceeded market expectations? (Assume a risk free rate of 0%.)