Has the Grexit news affected euro area financial markets?

This paper investigates whether news about Greek exit from the euro area has affected other European countries' sovereign bond yields. Our empirical analysis covers more than 64,000 daily news items on Grexit between December 2014 and October 2015. We build a Grexit intensity index that captures policy concerns about the euro area break-up. Higher intensity of Grexit news drives up government bond yields in peripheral countries (Italy, Portugal, and Spain, excluding Ireland), whereas there are no effects on core countries. Those reactions reveal a contagious punishment from the financial markets based on fear factors related to political stability of individual member state and the euro area's solidity.