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The CAC 40 index French: CAC Quarante) is one of the most influential indices for assessing the performance of the French economy, and one of the primary national indices of the Euronext group. Tracking the stocks of 40 out of France’s top 100 companies by market capitalisation, the CAC 40 allows investors to see fluctuations in value on the Euronext Paris.
On this page you’ll find a brief history of the CAC 40, along with how companies are selected for being tracked by the index, and how you can invest in it.
The CAC 40 was formed in 1987 to track the performance of what was then the Paris Bourse (which became Euronext Paris in 2000). CAC stands for ‘Cotation Assistée en Continu’ (Continuous Assisted Quotation), which was the name of the early automation system on the Paris Bourse.
As of 2003, the CAC 40’s weighting system shifted to being dependent on free float market cap, rather than total market capitalisation as it had been originally. The index tracks the 40 most influential stocks out of the top 100 listings on the Euronext Paris.
Much like many other European and global indices, the CAC saw sharp rises at the start of the millennium due to the dotcom bubble, and a steep fall during the 2007/8 financial crisis. In the decade after the 2008 crash, the CAC 40 responded strongly, but the index then once again saw a heavy decline due to the coronavirus pandemic.
The stocks tracked by the CAC 40 are taken from the top 100 performing companies on the Euronext Paris by free float market capitalisation. Forty of these stocks are selected in order to ensure that the CAC 40 gives an accurate representation of companies across the French economy, and weighting for each stock is capped at 15%.
The list of companies tracked by the CAC 40 is reviewed quarterly, and the vast majority of the stocks measured by the index are of companies domiciled in France.
The easiest and most flexible way to invest in the CAC 40 index is through using an exchange traded fund (ETF). There are other options available including mutual funds and simply buying stock in all 40 companies tracked by the CAC 40. However, with the former of these you’ll pay higher fees than with ETFs and will be unable to trade your investment freely, and the latter is more time-consuming and will likely incur a lot of charges through your chosen broker.
ETFs have become popular among investors as they allow a way to invest in the performance of an index (such as the CAC 40), but keep the flexibility of being able to trade your investment on an exchange.