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. Refinance Wave

    A situation where a large amount of mortgage refinancing occurs ...
  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. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
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. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center