CAC 40
CAC 40 (Cotation Assistée en Continu 40) is a stock market index that measures the performance of 40 of the largest and most actively traded companies listed on Euronext Paris. Introduced on 31 December 1987 with a base value of 1,000 points, the index serves as the principal benchmark of the French equity market and is one of Europe's most widely followed stock market indices. The CAC 40 is a free-float market capitalization-weighted index, meaning that constituent companies are weighted according to the market value of shares available for public trading. The index is administered by Euronext and includes companies representing a broad range of sectors, including finance, luxury goods, energy, industrials, healthcare, consumer products, technology, and telecommunications.
History
The CAC 40 was launched on 31 December 1987 by the Paris Bourse, with an initial base value of 1,000 points. It was developed to provide a standardized measure of the performance of the French stock market and to serve as a benchmark for investors, financial institutions, and policymakers.
During the 1990s, the index expanded in importance as France's financial markets became increasingly integrated with European and global capital markets. The creation of Euronext in 2000, through the merger of the stock exchanges of Paris, Amsterdam, and Brussels, further strengthened the international role of the CAC 40.
The index has experienced significant fluctuations during major financial events, including the dot-com bubble, the 2007–2008 financial crisis, the European debt crisis, the COVID-19 recession, and periods of inflation and monetary tightening during the 2020s.
Methodology
The CAC 40 is a free-float market capitalization-weighted index.
Under this methodology:
- constituent companies are weighted according to their free-float market capitalization;
- only shares available for public trading are included in the weighting calculation;
- strategic holdings by governments, founders, or controlling shareholders are generally excluded;
- individual constituent weights may be subject to maximum limits to prevent excessive concentration.
The index value is adjusted continuously during trading hours to reflect changes in constituent share prices.
Composition
The CAC 40 consists of 40 large companies selected from securities listed on Euronext Paris.
Selection is based on factors including:
- free-float market capitalization
- trading liquidity
- turnover
- market significance
- sector representation
The index includes companies from numerous sectors, including:
- financial services
- luxury goods
- industrial manufacturing
- healthcare
- pharmaceuticals
- energy
- consumer products
- telecommunications
- aerospace
- construction
- information technology
Many constituent companies generate a substantial proportion of their revenue outside France, reflecting the international orientation of the French corporate sector.
Calculation
The CAC 40 is calculated using free-float-adjusted market capitalization.
The calculation generally involves:
- determining the free-float market capitalization of each constituent;
- applying any applicable weighting caps;
- aggregating adjusted market values;
- dividing the total by an index divisor.
The divisor is periodically adjusted to account for:
- stock splits
- bonus issues
- rights issues
- mergers
- acquisitions
- constituent changes
- spin-offs
These adjustments ensure continuity of the index over time.
Governance
The composition of the CAC 40 is reviewed periodically by the Scientific Advisory Council of Euronext.
The Council evaluates constituent companies based on:
- market capitalization
- liquidity
- trading activity
- free-float availability
- overall market representation
Companies may be added to or removed from the index during scheduled reviews or following significant corporate events.
Relationship with other indices
The CAC 40 is one of several major equity indices maintained by Euronext.
Related indices include:
- CAC Next 20
- CAC Large 60
- SBF 120
- CAC Mid 60
- CAC Small
- CAC All-Tradable
- CAC All-Share
Internationally, the CAC 40 is frequently compared with:
Applications
The CAC 40 serves as a benchmark for numerous financial products and investment strategies.
Its principal applications include:
- measuring French equity market performance
- benchmarking investment portfolios
- index funds
- exchange-traded funds
- futures trading
- options trading
- passive investment
- economic analysis
- financial research
The index is widely followed by domestic and international investors seeking exposure to the French equity market.
Impact
The CAC 40 is regarded as the principal indicator of the French stock market and one of Europe's leading equity benchmarks. Because many constituent companies are multinational corporations with extensive international operations, the index reflects both developments within the French economy and broader global economic conditions. It is widely used by investors, policymakers, economists, and financial institutions to monitor market performance, investor sentiment, and corporate activity in France. The index also serves as the basis for numerous investment products and derivatives traded in European and international financial markets.