Ostrich Effect (Eng. ostrich effect), a cognitive bias in which individuals deliberately avoid information they believe will be unpleasant. The concept is based on the widespread but false belief that ostriches bury their heads in the sand when threatened.^【1】 Individuals affected by this effect disregard the potential benefits of the information because they prefer to avoid the discomfort caused by possible bad news. Avoidance can manifest not only through concrete actions such as not checking account balances or postponing doctor appointments but also through psychological means: individuals may try to distance themselves from distressing thoughts or minimize their concerns.

Visual Illustrating the Ostrich Effect (Generated by Artificial Intelligence.)

History

The concept of the ostrich effect was first identified in 2006 through an observed pricing anomaly in Israel’s capital markets.^【2】 In this initial usage the term was introduced to describe investors’ tendency to behave as if risky situations did not exist.

In 2009 the concept was expanded within a model explaining when and how frequently investors monitor their portfolios.^【3】 Supported by data from Swedish and U.S. investors this study treated the ostrich effect not merely as an asset preference but as a general behavior of information avoidance, laying the groundwork for its application beyond finance.

In 2015 the concept was applied to health care decisions with a study based on Dutch data that established a link between loss aversion and avoidance of preventive screenings.^【4】 In 2024 it was examined in the context of daily banking behavior and spending habits.^【5】 In 2025 two separate studies extended the concept to new domains: one investigated at what age children begin to exhibit information avoidance, while the other adapted the ostrich effect to the field of creativity by introducing the concept of the “Originality Ostrich Effect.”^【6】

Ostrich Effect in Financial Markets

Asset Pricing

The concept originated from a surprising observation in Israel between February 1999 and November 2002: one-year government treasury bills consistently yielded higher returns than bank deposits with equivalent risk.^【7】 Under normal conditions the opposite would be expected because liquid assets, due to their ease of trading, typically offer lower returns. However in Israel investors preferred illiquid deposits and accepted lower returns in exchange. This discrepancy cannot be explained by taxes risk or transaction costs.^【8】

The behavioral explanation is as follows: Treasury bills are priced daily so investors are constantly exposed to fluctuations in their investment value. Bank deposits however are not subject to such continuous information flow. Loss-averse investors prefer this informational darkness to avoid bad news and pay for it with lower returns. As market uncertainty increases this tendency strengthens and the return differential between the two assets widens.^【9】

Portfolio Monitoring Behavior

The ostrich effect also manifests in how frequently investors monitor their portfolios. According to a model explaining information-seeking decisions active attention to information produces three outcomes: knowing a situation with certainty generates stronger emotional reactions than mere speculation; individuals adjust their expectations more rapidly to current conditions; and discomfort from bad news outweighs satisfaction from good news.^【10】 Together these three factors lead individuals to seek information more actively when good news is expected but avoid it when bad news is anticipated.^【11】

Analysis of retirement account access logs in Sweden and transaction records from a large U.S. investment firm revealed that in both countries investors checked their accounts far more frequently when markets were rising and less frequently when markets were falling or stagnant. In U.S. data a 1 percent increase in market returns was associated with a 5 to 6 percent increase in daily account log-ins.^【12】

Ostrich Effect in Health Care Decisions

The manifestation of the ostrich effect in health care is avoidance of preventive screenings. Although early diagnosis significantly improves treatment outcomes for many diseases fear of receiving a bad diagnosis deters many individuals from visiting doctors.^【13】

This avoidance stems from loss aversion: individuals perceive themselves as healthy and learning the true state of their health would feel like a loss. Those with strong loss-aversion tendencies are unable to accept the benefits of early diagnosis because they wish to avoid the emotional cost.^【14】

A study in the Netherlands confirmed this relationship. As levels of loss aversion increased participation rates and overall frequency of preventive screenings for hypertension diabetes and chronic lung disease decreased.^【15】 The difference between the highest and lowest levels of loss aversion corresponded to approximately a 10 percent reduction in the likelihood of participating in screening.^【16】

Ostrich Effect in Personal Finance Management

The ostrich effect also appears in daily banking behavior. Research based on millions of banking access records has shown that people avoid checking their bank accounts when they anticipate bad news.^【17】

This avoidance has tangible financial consequences. Those who check their accounts infrequently exhibit significantly more erratic spending patterns especially around payday. The tendency for excessive discretionary spending immediately after receiving a salary is 60 to 70 percent lower among those who monitor their accounts regularly. This difference is particularly evident in impulsive spending categories such as dining out and shopping. Although mobile banking apps have made account access easier this convenience alone does not eliminate the ostrich effect.^【18】

Developmental Origins

Children are typically known for their endless questions and curiosity but at some point this curiosity gives way to strategic avoidance. Experiments designed to determine at what age this transition occurs examined five distinct avoidance motivations: avoidance of negative emotions avoidance of information that threatens perceived likability or competence preservation of beliefs preservation of preferences and pursuit of personal gain.^【19】

Children aged five and six continued to actively seek information while children aged seven to ten began to avoid information that would generate negative emotions. For example older children did not want to learn why their favorite candy was harmful but had no discomfort learning the same information about their least favorite candy. A different pattern emerged regarding competence: children of all ages did not avoid learning whether they had failed a test.^【20】

Personal gain motivation was also tested. Children were asked to choose between two buckets one of which was shown to give them more stickers while the share of their peers was hidden. Although learning about their peers’ share had no cost older children increasingly avoided finding out about it thus preserving the appearance of fairness while still making a choice favorable to their own interests.^【21】

Ostrich Effect in Creativity

The concept of the ostrich effect has been extended beyond information avoidance into the domain of creativity. This phenomenon called the “Originality Ostrich Effect” describes how idea generators fail to recognize or believe that pursuing originality reduces the value of their ideas or assume that originality automatically leads to better ideas.^【22】

In an experimental study participants were asked to generate the most appealing idea with a monetary reward promised to the most successful. Idea generators did not believe that focusing on originality reduced the benefit of their ideas; instead they believed it increased their chances of success.^【23】 However independent evaluators consistently found that as originality increased the value of the ideas decreased.^【24】 This effect persisted even when participants were explicitly encouraged to prioritize benefit.

This negative effect operates in two ways: the pursuit of originality leads ideas to be perceived as both more unusual (and unusual ideas are rated lower by evaluators) and less practical.^【25】 Experimental evidence has shown that focusing first on benefit and then on originality can mitigate this negative effect.^【26】 A field study among experienced professionals revealed a similar pattern: competitors who emphasized creativity or originality were approximately three times more likely to be eliminated than those who did not.^【27】