Relationship between risk and return in portfolio management and capital asset pricing model

Speeding up the pace of development is possible through increasing financial sources, turning personal savings into more profitable investments, and giving major role to capital markets in the financial markets of developing countries. In the era of globalization, today obliges many investors to be more efficient while making investments. Selection of the portfolio is an important element in investment decisions. Now, portfolio management are indispensible in investment process. Risk factor is a major criteria that must be considered by investors in their financial decisions. This study examines two basic theories of asset pricing: Capital Asset Pricing Model and Arbitrage Pricing Theory. Theories are examined relationship between risk and return. In this study, a portfolio was chosen by using the adjusted returns over the period of 2005 year of the companies at SE 30 and 50 Index from MKB, and the risk and return of the portfolio were calculated. Then portfolios were formed causally from MKB 30 and 50 Index and their portfolio performance were measurement by Sharpe ratio.