3 On 22 February 2019, Baidu Inc. announced its financial results for the fourth quarter of 2018. The company reported that revenue rose to 27.2 billion yuan from 23.6 billion yuan a year earlier, beating the company's guidance and Wall Street targets. However, compared to the fourth quarter of 2017, the company's profit dropped 50% to 2.08 billion yuan, or 5.93 yuan per share. Excluding stock-based compensation and other items, profit fell to 13.18 yuan per share from 15.84 yuan per share a year earlier. Analysts expected the company to report profit of 8.48 yuan per share, or 11.98 yuan on an adjusted basis. For the first quarter of 2019, Baidu expects revenue to reach 24.1 billion yuan, compared with analysts' forecast of 24.25 billion yuan. On the same day, iQIYI Inc. announced that its fourth-quarter loss surged to 3.48 billion yuan from 612.4 million yuan a year earlier, as it continues to invest in original content. Analysts had projected a loss of 3.61 billion yuan. Revenue rose to 7.03 billion yuan, also beating internal and Wall Street targets. The company reported 87.4 million subscribers as of 31 December 2018, an increase of 72% from same period last year. For the first quarter of 2019, iQIYI expects revenue of 6.80 billion yuan to 7.10 billion yuan, above analysts' projected 6.58 billion yuan. Both companies' stocks are listed on Nasdaq. Following the earnings announcements, Baidu's stock price dropped 2.7% to close at $167.17 per share, while iQIYI's stock price rose 21.7% and closed at $27.70 per share. There was no significant change in Nasdaq Composite Index on that day. Required: a) Explain why Baidu Inc.'s stock price decreased in response to its earnings announcement. Assume market efficiency in your answers. (15 marks) b) Explain why iQIYI Inc.'s stock price increased in response to its earnings announcement. Assume market efficiency in your answers. (15 marks)