Why market overreacts?

I feel market exhibit the traits of 'bipoar disorder'- over reaction and excessive mood swings though in some cases later on market realises its mistake/over reaction and prices reverse back.

This is the single most important factor that has negatively affected my trading.

The over reaction is quite true during news event and apart from news event, market are usually calmer.

So the question is why do market over reacts? How can we cope up with market mood swings?

I think someone once said "All you need to know about the markets is greed and fear."

I mark NFP week in my diary and I won't bother trading too much. I leave my longer term trades on. The markets are usually flat leading up to it, anyway.

The markets never overact. It's traders who overact.

and i hope they'll never stop