Parenting... ah yes, there is no "correct" way to do it. It's too complex of a topic to define it in such simple terms.
But previous posts are right, teaching your kids with fear is extremely counter productive and Not effective.
Don't get me wrong there are times an places for spanking and such, (mostly before kids can talk) However, if your kids overwhelming feeling is they fear you (This dosn't mean they are scared when they do somthing wrong) This means that the first feeling they feel when they think of their parents is fear.
You screwed up parenting bad.
For me, I was never scared of being spanked or getting a time out. It was more the feeling, that I disappointed my parents. And this is how it should be, a kid should love and respect their parents, and be sad when they disappoint them.
There is no real surefire way to get this right, as everyone's situation and personality is different, and nothing is guaranteed to work for even most situations. That's why parenting is so hard. All of those "parenting" books might have some good tips, but following them as gospel is a recipe for disaster.
In the OP's situation.
Your sister just wants attention, so she does all the things that she knows will get her some (insulting, hitting, etc.)
This is a tough one since I really don't know anything about her.
My best bet would be to ignore her.
Completely
But for only when she is doing something bad.
- Even if she hits you
- Even if she breaks things
- Even if she cusses up a storm.
But, as soon as she does something nice, be her best friend.
When she does something Bad again, Ignore her completely.
Eventually her need for attention might outgrow her angriness, and she will be nice to you.
Again this isn't guaranteed to work, but if anything it sure will annoy the hell out of her at least. Just go hide anything precious to you.
Hitting her back wont do jack, It will only aggravate the situation.