At t=0, the management of Firm A decides that it will make an offer to acquire Firm B a week later (at t=1). At t=0, the stock prices of Firm A and Firm B both stay the same on average. However, at t=1, the stock price of Firm A falls and the stock price of Firm B rises.
What does this behavior imply about the informational efficiency of the market for the stocks of Firm A and Firm B?
Which form or forms of the Efficient Market Hypothesis is/are violated (if any)? Explain.