What does Ulcer Index measure?
✅ Lower = shallower and shorter declines
Takes into account the depth and duration of periods below an earlier peak: the deeper and the longer the value stayed below it, the higher the number.
Background: Peter G. Martin & Byron McCann, 1989.
How is Ulcer Index calculated?
√(Σ DD² / n)
DD = drawdown on day i (in %) · n = number of days. Drawdowns are squared: deep and long losses are penalised disproportionately.
How are values of Ulcer Index usually read?
- < 5
- very quiet
- 5 – 10
- normal
- 10 – 20
- choppy
- > 20
- hard
Rules of thumb — where a value lands depends on asset class, period and market phase. A classification is no recommendation.
Worked example with real prices
Three securities from the test data, four allocations, calculated in the portfolio backtester over the same period:
| World equities | Euro government bonds | Gold | Maximum drawdown | Ulcer Index |
|---|---|---|---|---|
| 100 % | 0 % | 0 % | -33.63 % | 6.24 |
| 60 % | 40 % | 0 % | -21.54 % | 4.98 |
| 40 % | 40 % | 20 % | -16.35 % | 3.63 |
| 0 % | 100 % | 0 % | -22.59 % | 8.96 |
Prices from 13 Nov 2009 to 7 Oct 2026 in euros, starting capital €10,000, annual rebalancing, without order fees and taxes; Sharpe ratio with a risk-free rate of 2 %. Past results are no indication of future ones.
All three securities are in the test data — you can recalculate the example yourself on the free plan.
When is Ulcer Index useful?
When you want to compare the depth and duration of declines in a single number.
What are the limits of Ulcer Index?
Hard to interpret intuitively: a value of 5 does not correspond to any particular decline or duration. It is most useful for comparison; compare portfolios over the same period and with the same calculation rules.
Where do you see Ulcer Index for your own securities?
In the portfolio backtester, Ulcer Index appears for every calculated allocation of your securities. The Watchlist shows it for each individual security.
Last updated: 30 Oct 2026