Media Effect

AAA

DEFINITION of 'Media Effect'

A theory that relates how stories published in the media influence or amplify current trends. Borrowers or investors will read an article and be influenced to act quickly on the news. The media effect is often seen in the mortgage market, when prepayment rates can sharply increase following specific news stories.

INVESTOPEDIA EXPLAINS 'Media Effect'

The media effect causes increases in the number of refinanced mortgages during low interest rate periods. For example, let's say The New York Times publishes a story revealing a drop in interest rates and how it relates to mortgages. The media effect dictates that those who read the article are more likely to increase the prepayment rates on their mortgages and refinance according to the story.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  3. Prepayment

    The satisfaction of a debt or installment payment before its ...
  4. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  5. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
  6. Refinance Wave

    A situation where a large amount of mortgage refinancing occurs ...
Related Articles
  1. How Mortgage Refinancing Affects Your ...
    Credit & Loans

    How Mortgage Refinancing Affects Your ...

  2. How Interest Rates Affect The Housing ...
    Economics

    How Interest Rates Affect The Housing ...

  3. The Benefits Of Mortgage Repayment
    Home & Auto

    The Benefits Of Mortgage Repayment

  4. Financial Media 4-1-1 For Investors
    Economics

    Financial Media 4-1-1 For Investors

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center