Econophysics, obtain economics insights from the physical world. Through this eyes a stock market panic is an avalanche. Remember, starling flocks are flying avalanches.
This weekend I read Possible Early Warning Sign for Market Crashes in Wired Science Blog. It refers to research that measures co-movement of stocks - the likelihood that they move in the same direction.
Regardless of whether the prices go up or down, they do so in tandem. People are copying each other, and a small nudge can send everyone in the same direction. the system seams primed to collapse.
This interesting article, predicting economic market crisis using measures of collective panic, shows the implementation of systems in which networks of interacting units lead to radical collective behavior, controlled by exogenous stimuli and interactions within the network (usually bubble building ...).
With the metaphor of the starling flocks it is not so surprising to me that panic from a real or imagined threat turns into collective flight. Flocks become avalanches ... and a large probability of co-movement is a measure of systemic risk, whilst volatility, although a measure of risk, is not necessarily a reliable crisis predictor. And mimicry becomes much more important than external news.