Ulcer Index
a.k.a. UI
A measure of downside risk that captures both how deep and how long an investment's drawdowns are.
In plain English
A measure of downside risk that captures both how deep and how long an investment's drawdowns are.
The Ulcer Index, created by Peter Martin, measures the pain of holding something: how far it falls from its previous peak and how long it stays down. A sharp, brief dip scores lower than a long, grinding slide, even if both hit the same bottom.
It is named for the stomach ulcers such drawdowns give investors. Unlike standard deviation, it ignores upside swings and focuses on the misery, which is closer to how humans actually experience risk.
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