Ulcer Index (UI)
An indicator developed by Peter G. Martin and Byron B. McCann that is used to measure the riskiness of investments such as securities, commodities, indexes or mutual funds. It is created by factoring in the depth and duration of drawdowns from recent peaks. A large UI value indicates that the security represents undue risk and an investor who holds it will likely need to wait longer for the investment's price to climb back to its recent highs. Investopedia Says:
This tool is often used in conjunction with other risk measurements such as standard deviation. Investors who are risk averse should probably stay away from securities with high UI values because, if these securities experience a severe decline, they are unlikely to recover in the near future.
Since the ulcer index measures change from a recent peak, it is more practical to think of it as a short-term risk measure. Related Terms:
Drawdown
Risk
Risk Averse
Risk Lover
Risk Tolerance
Standard Deviation
Volatility |