The Ulcer Index & Underwater Duration: Measuring Psychological Drawdown Stress [2026]
Date Published
1. The Time Dimension of Portfolio Pain
Peter Martin's Quadratic Drawdown Formulation
Created by Peter Martin in 1987, the Ulcer Index is calculated as: UI = sqrt((1 / n) * sum(D_i^2)), where D_i is the percentage drawdown from the previous all-time equity high on day i. Because drawdowns are squared, deeper and longer underwater periods balloon the index exponentially.
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