A theory that seeks to explain the effect that 24-hour news networks, such as CNN, have on the general political and economic climate. Because media outlets provide ongoing coverage of a particular event, or subject matter, the attention of viewers is narrowly focused for potentially prolonged periods of time. The CNN effect can therefore cause individuals and organizations to react more aggressively towards the subject matter being examined. For example, regular coverage of turmoil in the banking sector may result in the Federal Reserve taking the necessary action to minimize any potential detrimental effects.
The effect that media outlets have on consumer behavior has been examined since the CNN effect came to prominence during the 1980s. For example, by focusing on natural disasters, news outlets may influence consumers and investors to react more drastically to what is unfolding. While this can be viewed as a criticism, media outlets also shed light into the inner workings of governments and businesses, which may increase accountability.
Investment dictionary. Academic. 2012.
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