Media Effect

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.

BREAKING DOWN '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 Economics

    The study of psychology as it relates to the economic decision ...
  3. Behavioral Finance

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

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

    1. When a business or person revises a payment schedule for repaying ...
  6. Refinance Wave

    A situation where a large amount of mortgage refinancing occurs ...
Related Articles
  1. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  2. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  3. Home & Auto

    The Benefits Of Mortgage Repayment

    Buying a home may be the biggest debt you'll ever incur. Learn why you should retire it sooner, rather than later.
  4. Economics

    Financial Media 4-1-1 For Investors

    Cut through the information clutter and decipher the useful news from the useless.
  5. Investing

    A Case Study: Earnings Manipulation And The Role Of The Media

    Here we explore why the media focuses on certain earnings manipulation cases in post-Enron Wall Street.
  6. Economics

    Understanding Game Theory

    Game theory is a model for making decisions that weighs the benefits of a choice along with the interaction between participants.
  7. Economics

    Understanding Imperfect Competition

    Imperfect competition appears in several different forms. Markets are evaluated by how they compare to, and try to approach, perfect competition.
  8. Fundamental Analysis

    Calculating The Gain Or Loss On An Investment

    Calculating the percentage of change in an investment is easy. Take the amount the investment gains and divide it by the amount invested.
  9. Investing

    What Happens to Bond ETFs in Stressed Markets?

    We are going to dive a little deeper today at how bond exchange traded funds (ETFs) fare when the markets are stressed.
  10. Active Trading Fundamentals

    What Does Bid And Asked Mean?

    Bid and asked is a two-way price quotation.
RELATED FAQS
  1. What are some of the disadvantages to taking venture capital?

    Learn how financing a business through venture capital can be a viable source of funding for small businesses but know caveats ... Read Answer >>
  2. Is the upfront cost of Class A mutual fund shares worth it?

    Learn about the differences between mutual fund share classes, and discover under what circumstances the Class A shares make ... Read Answer >>
  3. How does correlation affect the stock market?

    Learn about the role correlation plays in prudent stock market investing, and how the correlation coefficient is used to ... Read Answer >>
  4. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Answer >>
  5. What is the 'Rule of 72'?

    The 'Rule of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of ... Read Answer >>
  6. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center