Before revision:  Paradoxically, it is the attempt for investors to learn the level of relevance of the news on the price formation which leads to a dramatic amplification of the price volatility due to their collective search for the "truth" . A positive feedback loop is created by the two dominating mechanisms ( Bayesian learning and imitation) which, by reinforcing each other, result in rallies and crashes.
After revision:  Paradoxically, it is the attempt for investors to adapt to the current market regime which leads to a dramatic amplification of the price volatility due to their collective search for the "truth" . A positive feedback loop is created by the two dominating mechanisms ( Bayesian learning and imitation) which, by reinforcing each other, result in rallies and crashes.