Psychological explanation for perceptions of the Loch Ness monster
Herd mentality and hallucinations can explain many things like the Loch Ness monster, ware wolves, vampires and ghosts.


  Hallucinations involve sensing things while awake that appear to be real, but instead have been created by the mind.


Extreme emotional states can cause psychosis which leads to hallucinations and delusions and other thoughts which are removed from reality. Many things can stir an otherwise normal person into a frenzy which then provides the vulnerability for psychosis. Then at the sight of wave their imagination is more real than what their eyes see and the image of a monster is imprinted in their memory. If the monster is attacking them or something else it might be an intrusive thought as well. 

After the initial hallucination the story is repeated and herd mentality will cause others to experience something similar at the sight of the wave. As more people experience the sighting it becomes more popular continuing and expanding the myth.