There was an interesting doco on SBS last night - How To Survive A Disaster
A team of leading experts put together the ultimate guide to disaster survival. Through controversial experiments, computer simulations and analysis of hundreds of survivor testimonies from plane crashes to ferry disasters and even 9/11, they reveal what happens in the mind in the moment of crisis and how the human brain can be programmed for survival.
I didn't watch the entire show, but there was an interesting experiment demonstrating herd behavior at work during disasters....a quick summary:
With one person in a room filling out a form, smoke was pumped under a door close by. The subject quickly left to alert someone of the smoke.
Again the experiment was repeated this time with a group. However, the entire group - except one person, was secretly given instructions to ignore the smoke. As the smoke filled the room, the individual who was unaware they were participating in an experiment did not seek help or even speak out, but instead stayed quiet (but very anxious) until someone else from the group acted (when the smoke was considerably thick).
It struck me as being very similar to the markets - when optimism is at an extreme, very few will smell the smoke and get out on the high. Even when a downtrend is established - many will still stay in (hold for the long term), ignoring the smoke and flames, perhaps to exit near the bottom when pessimism is at an extreme.