The CAC 40 is the most widely used indicator of the performance of the Paris Stock Exchange. It is made up of the 40 largest and most actively traded companies listed on Euronext Paris.
It is a free float market capitalisation weighted index. The free float amount is based on shares that are available to trade and not held by the government or officers and staff of the company. Weightings are based on market capitalisation.
As of September 2017 the market capitalisation of the index was €1491.7bn with a free float value of €1162.9bn or 78%.
Based in France
To be eligible for the CAC 40 companies have to have a significant presence in France such as a head office or have significant trading volumes in the country. They do not have to be French companies.
Two Dutch companies and one Belgian one are in the CAC 40 at the moment.
Euronext, which also operates stock exchanges in Amsterdam, Brussels and Lisbon, compiles the index and manages it on a day-to-day basis. The index is calculated every 15 seconds during regulated trading hours.
Quarterly reviews of the make-up of the CAC 40 take place in March, June, September and December. At the quarterly review in September 2017 Nokia was replaced by STMicroelectronics.
An annual review of weightings of the companies in the index takes place in September. Weightings are capped at 15% in this review although they will vary throughout the year. Total’s weighting was the highest in the September 2017 review at 9.28%.
Membership of the index is overseen by Le Conseil Scientifique des Indices, an independent body made up of representatives from organisations, including the French market regulator AMF, Banque de France, the national statistics bureau INSEE and economics research centre Rexecode.
Euronext and Le Conseil Scientifique may, exceptionally, decide to deviate from the rankings if it is felt to be in the interest of the users of the index. Guiding principles for such decision are tradability of the index, minimising index turnover and representativeness.
Companies are selected for the index based on a combination of two rankings – the value of regulated turnover over a 12-month period and the free float capitalisation on the cut-off date. After the September 2017 review the biggest companies by weighting were:
- BNP Paribas
Some 18 sectors are currently represented in the CAC 40 with the largest ones being:
- Industrial goods and services
- Oil and gas
- Personal and household goods
Highs and lows
The index was launched with a base value of 1,000 calculated as of 31 December 1987. It reached its highest closing value of 6922.33 on 4 September 2000 at the height of the dotcom bubble. It hit its lowest value of 893.82 in January 1988.
On 5 October 2008 the CAC 40, like many other European indexes, fell sharply as a result of uncertainty about the financial sector. It lost 9% over the day. Another big fall of 8% occurred on 24 June 2016, the day after the UK’s Brexit vote.
Confidence about the likely outcome of the French election saw large rises in April 2017, taking the index to levels not seen since before the financial crisis in 2008.
CAC originally stood for Compagnie des Agents de Change, the founding operators of the Paris Stock Exchange, agents de change being stockbrokers.
When the Paris Stock Exchange was reformed in the 1980s the original company was dissolved and replaced by the Société des Bourses Françaises but the acronym endured.
The start of the new market coincided with the launch of electronic trading in France and CAC then came to stand for Cotation Assistée en Continu or continuous assisted quotation.
The CAC 40 was also devised to facilitate trading of derivatives and is used as an underlying reference for options and futures, funds, exchange traded funds and structured products. There are also contracts for difference (CFDs) available permitting day trading of the CAC 40.
The volatility index for the CAC 40, which shows the rate at which prices in the index have been increasing and decreasing, has varied wildly over the past year with figures ranging from 0.177 to 73.74. Since the French election result things have been more consistent and the index has stabilised at around 13.