Media Effect

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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 ...
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