I think this article rather refines the discontinuous approach of AMH from Lo than replacing parts of it. The switching between rational and irrational behavior of market participants may be unexplained by AMH. But it is consistent with switching between slow, rational, unbiased on the one hand and fast, irrational, biased thinking and subsequent behavior on the other, which Kahnemann discovered.

Thus, the answers to the author's questions, intended to motivate his continuous approach, are rather obvious. The author asks:
"But why should normally “rationally” acting professional investors suddenly turn “irrational” in market downturns?"
Well, because their main drivers are peer pressure, career risk and opportunity, which may cause them to switch to fast irrational behavior when market dynamics rises due to innate fear and greed, respectively, just as behavioural economics explains it.

"And why should normally “irrationally” acting retail investors suddenly turn “rational” in normal markets?"
Because large losses may sober them or bankruptcy just ends their game.

However, why should professional and retail investors usually act in these opposite ways predominantly rationally and irrationally, respectively, in the first place?

After watching the authentic German TV series "Bad Banks" and learning of the god-like attitudes as well as of the dysfunctionally selfish behaviour of large public banksters, such as Blankfein from Goldman Sachs, doing "God's Work", and the like, playing irresponsibly with other people's and taxpayer's money, on the one hand, and knowing my own way and that of friends of much longer-term buy-and-hold investing mainly for retirement with consequently contrarian rebalancing, I would rather assume that professional and retail investors rather act opposite, namely predominantly irrationally and rationally, respectively.

This would also be much more consistent with the fast and thus more irrational behaviour in the fast business environment and with the slow and thus more rational behavior in the slow private environment.

Thus, markets are dominated by large irrational market players. As there are certainly large rational professional participants as well, such as excellent pension, endowment (Yale) and hedge funds (Bridgewater, Winton), rationality and irrationality should be more normally distributed in the professional and retail world.

"And why do environments change from “normal” and continuous to “abnormal” and discontinuous?"
These are rather simple non-linear effects of complex systems with self-amplifying positive feedback loops due to reflexivity, escalating until they hit hard boundaries and break down.

However, the approach of the author with "subjective" rationality may indeed help to explain the behaviour of practically always subjectively rational market participants with incomplete information and understanding, be they professional or retail investors, and the respective effects on longer-term continuous dispersion of returns patterns of many years and even decades before mean reverting a little better.

But in my opinion it does not change any assumptions or implications of the AMH. Because it's discontinuities can be well explained by the outright irrational behavior, guided by incompetence and strong emotions of the majority of professional and retail investors alike. Relatively frequent discontinuous changes into phases of irrational exuberance and following disruptions are well known effects of 2nd order chaotic systems such as the financial system.