Burke Ratio
Calculate the Burke Ratio of an investment portfolio or asset’s returns.
The Burke Ratio is a risk-adjusted return metric that divides the excess return (return minus the risk-free rate) of an investment portfolio or asset by the square root of the sum of its squared drawdowns, penalizing both the frequency and depth of drawdowns more heavily than the Calmar or Sterling Ratios.
The formula is as follows:
\[\text{Burke Ratio} = (\text{Return} - \text{Risk-Free Rate}) / \sqrt{\operatorname{SUM}(\text{Drawdown}_{d} ^{2})}\]Where Drawdown_d is the drawdown from the running peak at every observation d on which the asset is below that peak, which by default is every such day within the period. This weighs the time spent under water as well as the depth, so the ratio differs from the version that sums one drawdown per episode.
Burke Ratio in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_burke_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["BA", "LMT", "RTX"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2020-01-01",
end_date="2025-12-31",
)
toolkit.performance.get_burke_ratio()
Or, after setting up the Finance Toolkit MCP, ask:
What was the Burke ratio of Boeing, Lockheed Martin and RTX in each year from 2021 to 2025?
Which returns:
| Date | BA | LMT | RTX |
|---|---|---|---|
| 2021 | -0.0305 | 0.014 | 0.3334 |
| 2022 | -0.0181 | 0.3247 | 0.109 |
| 2023 | 0.2136 | -0.0588 | -0.0744 |
| 2024 | -0.0697 | 0.0508 | 0.6619 |
| 2025 | 0.1203 | -0.0134 | 1.0527 |
Parameters
get_burke_ratio accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
period | str | The period to use for the calculation. Defaults to “quarterly” if the Toolkit is initialised with quarterly=True, otherwise “yearly”. | "quarterly" |
within_period | bool | Whether to calculate the drawdowns within the specified period or for the entire period. Thus whether to look at the drawdowns within a specific year (if period = ‘yearly’) or look at the entirety of all years. Defaults to True. | False |
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |