The Ulcer index was developed by Peter G. Martin and Byron B. McCann. It is an indicator that is used to measure the riskiness of investments such as securities, commodities, mutual funds etc. It is created by factoring in the depth and duration of drawdown from recent peaks. A large UI value indicates that the security represents undue risk and an investor who holds it will … [Read more...]
Application and Chart of Ulcer Index
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 … [Read more...]
Ulcer Index -The Basic Concept
The Ulcer Index measures the "stress" of holding a trade or investment by measuring price retracements. The Ulcer Index is based on the notion that downward volatility is bad, but upward volatility is good. Unlike standard deviation, the financial industry's benchmark way of measuring the risk of a stock, which equally weights both violent increases to the upside (upside … [Read more...]