The plethora of risk statistics that are available for time-weighted rates of return (TWRR) use the intra-period returns. For example:
- standard deviation (we can continue its appropriateness as a risk statistic)
- tracking error
- downside deviation
Recall that the IRR measures the return for a single period; there is no linking. Comparing the portfolio's IRR with the benchmark's only serves the purpose of seeing how well the portfolio did. But how can we measure risk if we use the IRR?
Reflect on this for a bit; I will return to this matter soon, with some concrete ideas.