Market Sentiment (VIX) and ETF Returns
Fixed-effects panel regressions on 21 years of weekly data across 9 major ETFs, quantifying how VIX-driven sentiment affects returns — and how that effect differs by market segment and by up/down regime.
TECH STACK
Deep Dive
Panel study of how the VIX (CBOE Volatility Index) affects weekly returns across nine ETFs spanning broad market, style, sector, and international segments (SPY, QQQ, IWM, VUG, VTV, EFA, EEM, XLF, XLK), using weekly data from December 2004 to November 2025 (10,260 ETF-week observations).
Fixed-effects panel regressions (fund and time controls, robust SEs) show a one-point rise in the VIX is associated with a 0.160 percentage-point drop in weekly ETF returns (p<0.01, R²=0.127) — a one-standard-deviation VIX move (8.5 points) works out to roughly a 1.36pp drag. A VIX × market-return interaction term is positive and significant, meaning the effect is asymmetric: volatility during market downturns is more damaging than the same volatility level during rallies.
ETF-specific regressions reveal meaningful heterogeneity: financials (XLF, -0.196) and small caps (IWM, -0.187) are most sensitive to volatility shocks, while value stocks (VTV, -0.142) are the least sensitive — a spread that matters for anyone sizing sector exposure around volatility regimes.
Average Weekly Return by VIX Regime
Computed directly from the panel dataset, Dec 2004 – Nov 2025. Hover a bar for the exact value.