CAC 40

CAC 40. The CAC 40 is the benchmark French stock market index, representing a capitalization-weighted measure of the 40 most significant companies among the 100 largest market caps listed on Euronext Paris. It is a key indicator of the health of the French economy and a leading blue-chip index in the Eurozone. Managed by the Index Steering Committee, its composition is reviewed quarterly to reflect the evolving Paris financial market.

History

The index was launched on 31 December 1987, with a base value of 1,000 points, by the Compagnie des Agents de Change, the predecessor of the modern French market authority. Its creation provided a modern benchmark for the Paris Bourse, tracking the performance of major French industrial groups. Significant milestones include its transition to a free-float methodology in 2003 and the move to continuous electronic trading on the Nouveau Marché system. The index weathered major global events like the Dot-com bubble, the 2008 financial crisis, and the COVID-19 pandemic, with its governance later falling under Euronext after the merger of several European exchanges including the Amsterdam Stock Exchange and the Brussels Stock Exchange.

Composition

The index comprises 40 of the largest and most liquid stocks traded on Euronext Paris, selected from the broader SBF 120 index. Constituents span major global sectors, featuring multinational giants such as LVMH, TotalEnergies, Sanofi, and L'Oréal. The Index Steering Committee, which includes representatives from Euronext and the French financial markets authority, reviews the list quarterly. Companies like Airbus, BNP Paribas, and Hermès International are typical members, representing industries from aerospace and banking to luxury goods and telecommunications, ensuring the index mirrors the structure of the French economy.

Calculation methodology

The CAC 40 is a free-float market capitalization-weighted index. The calculation uses the prices of constituent stocks from the Euronext Paris continuous trading session, considering only shares readily available for trading to exclude locked-in holdings. The index value is derived from the total adjusted market cap of the components relative to its base date. This methodology is similar to that used by other major indices like the S&P 500 and the DAX. The formula incorporates a capping factor to prevent any single stock, such as LVMH, from exerting excessive influence, ensuring balanced representation as governed by the Index Steering Committee.

Performance and records

The index has experienced significant volatility and growth since its inception. It reached its all-time intraday high in September 2024, driven by strong performances from sectors like luxury goods and finance. Major crashes occurred during events such as the Black Monday (1987), the European debt crisis, and the 2022 stock market decline. Its performance is often compared to peers like the DAX, the FTSE 100, and the Euro Stoxx 50. Long-term charts show recovery patterns post-crises, influenced by monetary policies from the European Central Bank and global economic trends.

Economic significance

As France's primary stock market benchmark, the CAC 40 is a crucial barometer for domestic and international investors assessing the French economy. It influences investment flows into French assets and is a underlying reference for myriad financial products including exchange-traded funds, futures contracts, and options (finance). The combined market capitalization of its constituents represents a substantial portion of the total valuation of Euronext Paris. Movements in the index impact pension funds, insurance companies like AXA, and inform the economic policies of institutions such as the Banque de France and the International Monetary Fund.

Category:Stock market indices