The problem is that asset prices (whether real estate or the exchange rate) are quite random in the short run, and the short run is the investment horizon relevant to fund managers – they are judged on their quarter-by-quarter (or month-by-month) performance. In a market dominated by such investors, there are no Friedmanite stabilising speculators to buy when the price falls.
Even rational investors join the herd. 20 21  Even hedging simply shifts this to another party.