Greek government‐debt crisis events and European financial markets: News surprises on Greek bond yields and inter‐relations of European financial markets.

We study the impact of Greek government‐debt crisis events on inter‐relations of European financial markets during the European sovereign debt crisis. To this end, we examine the effects of three categories of Greek government‐debt crisis events in the realized correlations and correlation jumps of government bonds, CDS, and stock indices of seven European countries (i.e., France, Germany, Greece, Ireland, Italy, Portugal, and Spain) via the respective dummy variables and news surprises on 2‐year, 5‐year, and 10‐year government bonds and CDS in a non‐parametric framework by employing Tobit regression models. According to the results, the direction of most impacts on correlations and correlation jumps is negative, suggesting that the Greek government‐debt crisis events reduced the homogeneity among member states in the Eurozone. We also investigate the types of Greek government‐debt crisis events that have the highest impacts on correlations and correlation jumps and find that the highest impacts mainly result from news originating from Greek and European sources. [ABSTRACT FROM AUTHOR]