Probability distributions estimated largely, or exclusively, over cycles excluding periods of panic will underestimate the probability of extreme price movements because they fail to capture a secondary peak at the extreme negative tail that reflects the probability of occurrence of a panic.
When agents fail to update, they make decisions based on information that is to some extent out of date. The updating is staggered across the population, so that at any one time some people are paying attention to news, while others remain inattentive. As a result, information diffuses gradually in the economy. The average forecast responds slowly to news, as in the data.