UlcerIndex: calculate the Ulcer Index

In ecjbosu/PerformanceAnalytics: Econometric tools for performance and risk analysis.

Description

Developed by Peter G. Martin in 1987 (Martin and McCann, 1987) and named for the worry caused to the portfolio manager or investor. This is similar to drawdown deviation except that the impact of the duration of drawdowns is incorporated by selecting the negative return for each period below the previous peak or high water mark. The impact of long, deep drawdowns will have significant impact because the underperformance since the last peak is squared.

Usage

UlcerIndex(R, ...)

Arguments

R	a vector, matrix, data frame, timeSeries or zoo object of asset returns
...	any other passthru parameters

Details

UI = sqrt(sum[i=1,2,...,n](D'_i^2/n)) where D'_i = drawdown since previous peak in period i

DETAILS: This approach is sensitive to the frequency of the time periods involved and penalizes managers that take time to recover to previous highs.

REFERENCES: Martin, P. and McCann, B. (1989) The investor's Guide to Fidelity Funds: Winning Strategies for Mutual Fund Investors. John Wiley & Sons, Inc. Peter Martin's web page on UI: http://www.tangotools.com/ui/ui.htm

## Test against spreadsheet at: http://www.tangotools.com/ui/UlcerIndex.xls

Author(s)

Matthieu Lestel

ecjbosu/PerformanceAnalytics documentation built on March 24, 2020, 3:43 a.m.