Bubbles are produced by rational small-scale behavior. That's the fascinating thing about bubbles. The "greater fool" theory is frequently a good bet. Except, of course, when there is no greater fool and you're left holding the bag.
More importantly, outside events or circumstances could mean there isn't money in the right place to be able correct market price mistakes.
That said, the "efficient market hypothesis" of which you speak; that is, the idea that any and all future price rises and falls have already been factored in - is false.
Many investors _are_ ignorant. Many are stupid. Many are prone to panic. They are prone to everything that all other humans are prone to. Many are in fact big funds that have preset automated buying and selling positions and would happily buy and sell regardless of what else is going on.
As evidence, I point to every bubble and crash there has ever been.