How (in)efficient is after-hours trading?

Short-term Overreaction in American Depository Receipts

“…In our sample, the price reversal tends to be much more pronounced when the extreme price movements take place after-hours. This finding supports the assertion that price discovery during overnight tends to be less efficient (e.g., Hendershott, 2003, 2004;Raudys et al, 2013).…”

“…Overall, our evidence indicates that ADR prices exhibit a significant overreaction, especially in the after-hours market. This supports the assertion of those authors who argue that after-hours markets tend to be less efficient (e.g., Hendershott, 2003, 2004;Raudys et al, 2013).…”

“…An extreme price movement is classified according to whether it took place in daytime or overnight with a dummy variable. One should expect a larger overreaction overnight since the literature suggest that prices on this period are less efficient (e.g., Barclay and Hendershott, 2004;Raudys et al, 2013).…”

“…In addition, Jain et al (2019) show that the short-sellers' after-hour trading following quarterly earnings announcements are informed. Finally, Raudys et al (2013) and Lou et al (2019) argue that during the after-hours period the market is thinly traded and prices are inefficient. Price spikes up or down can be observed overnight in a pattern that can be exploited by a simple contrarian strategy.…”