Purpose ‐ This paper aims to extend the Fama and French (FF) three-factor model in studying time-varying risk premiums of Sector Select Exchange Traded Funds (ETFs) under a Markov regime-switching framework. Design/methodology/approach ‐ First, the original FF model is augmented to include three additional macro factors ‐ market volatility, yield spread, and credit spread. Then, the FF model is extended to a model with a Markov regime switching mechanism for bull, bear, and transition market regimes. Findings ‐ It is found that all market regimes are persistent, with the bull market regime being the most persistent, and the bear market regime being the least persistent. Both the risk premiums of the Sector Select ETFs and their sensitivities to the risk factors are highly regime dependent. Research limitations/implications ‐ The regime-switching model has a superior performance in capturing the risk sensitivities of the Sector Select ETFs, that would otherwise be missed by both the FF and the augmented FF models. Originality/value ‐ This is the first research on Sector Select ETFs with Markov regime switching.