In behavioral finance

Behavioral finance

Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market...

, the ostrich effect is the avoidance of apparently risky financial situations by pretending they do not exist. The name comes from the common (but false) legend that ostriches

Ostrich

The Ostrich is one or two species of large flightless birds native to Africa, the only living member of the genus Struthio. Some analyses indicate that the Somali Ostrich may be better considered a full species apart from the Common Ostrich, but most taxonomists consider it to be a...

 bury their heads in the sand to avoid danger.

Galai and Sade (2006) explain differences in returns in the fixed income market by using a psychological explanation, which they name the "ostrich effect," attributing this anomalous behavior to an aversion to receiving information on potential interim losses. They also provide evidence that the entrance to a leading financial portal in Israel is positively related to the equity market. Later, research by Loewenstein and Duane Seppi determined that people in Scandinavia

Scandinavia

Scandinavia is a cultural, historical and ethno-linguistic region in northern Europe that includes the three kingdoms of Denmark, Norway and Sweden, characterized by their common ethno-cultural heritage and language. Modern Norway and Sweden proper are situated on the Scandinavian Peninsula,...

looked up the value of their investments 50% to 80% less often during bad markets.