The CAC 40 index is composed of 40 of the largest companies on the Euronext Paris Exchange, previously the Paris Bourse. The CAC (Cotation Assistée en Continu) is named after the Paris Bourse’s early automation system of the same name. Among the multinational companies listed on the index are Michelin, L’Oreal and Renault.
The index is the main benchmark index for the Euronext Paris, similar to the Dow Jones Industrial Average in the U.S., the DAX in Germany, and the Nikkei in Japan. The CAC index is the one most frequently quoted to represent the overall French market level, sentiment, and direction.
The index is reviewed quarterly by a committee. The top 100 companies on the Euronext Paris are ranked based on market capitalization and share turnover. From those 100, 40 are selected for the index.
The index is float-weighted, so the market capitalization is calculated as the share price multiplied by the number of shares available for public trading.
The CAC 40 Index: What You Need to Know
- While nearly all of the CAC 40 companies are French, many of the companies are international or multinational, with two-thirds of their business and workforce located outside France. About 45% of its listed shares are owned by foreign investors.
- Because of the globalization of French companies, the CAC reacts to world events such as natural disasters, wars, political unrest, and economic news. It is also important to follow economic data from France and the European Union, including unemployment rates, job creation, interest rates, GDP figures, and other economic benchmarks.
- U.S. financial news has an effect on all worldwide markets, so when reports or interest rates are expected it generally influences trading in the European markets as well.
Trading the CAC 40 requires a full analysis of market conditions before trading, including review of the latest news and reports as well as price charts.Trade CAC 40