This article analyzes the reaction of S&P 500 Index returns to changes in implied volatility given by the CBOE Volatility Index (VIX), using daily data samples from 1990 to 2012. The authors found that in normal regimes increases (declines) in the expected market volatility result in lower (higher) subsequent stock market returns. Thus, investors enter into selling positions upon a perception of increased risk for their equity investments, while they enter into long positions when they perceive an improved environment for those investments. For extreme regimes, however, investor reaction to increasing risk is ambiguous. The authors find that VIX variation significantly influences investment strategies for holding periods up to one month. Additionally, they propose an investment rule for short-term-oriented investors.