France CAC-40 Index
The France CAC-40 Index, known as the Cotation Assiste en Continu, is a benchmark French stock market index maintained by Euronext. It consists of the top 40 companies based on market capitalization. The CAC-40 was created in 1988 and is one of the most widely followed indices in Europe. The index is seen as an indication of the prevailing sentiment in the French equity market.
The CAC-40 Index is a price index meaning it tracks changes in the value of the underlying stocks and not the total market capitalization of the companies listed. The index is composed of 40 French, blue-chip stocks listed on the Paris Bourse. Companies listed on the CAC-40 comprise a diverse range of industries and sectors, such as construction, energy, finance, healthcare, retail, transportation and utilities. As such, the index is seen as a proxy of the overall French economy, where an increase in the index reflects an increase in economic activity and vice versa.
The index is reviewed and adjusted on a quarterly basis, largely in line with the French market’s annual performance. Companies that underperform or become unattractive can be removed and replaced with ones that are expected to show strong performance over the longer term. The CAC-40 is not an index underlying a futures contract, and until recently, was not part of the Dow Jones Industrial Average Currency Dow, a calculation of a basket of currencies.
As of March 2021, the largest components of the CAC-40 are BNP Paribas with a weighting of 8.57%, Sanofi with a weighting of 7.42%, and Total with a weighting of 5.10%. These companies reflect the diversity of the industries and sectors covered on the index, with BNP Paribas being financial services, Sanofi being healthcare and Total being energy.
The performance of the CAC-40 is monitored by Euronext, which publishes the index on a continuous basis. The index has a main component, the CAC-40, which tracks the value of its members by reference to the underlying stocks, as well as a component known as the CAC Next 20. This component tracks the performance of the next 20 largest companies by market capitalization, outside of the CAC-40.
In terms of returns, the CAC-40 is similar to other international indices such as the S&P 500 or the Nikkei 225. Over one year, the index has had a return of -7.06% while over longer periods of five to ten years, the return is much higher. Since 1997, the five-year return stands at 27.7%.
Since the index launched in 1988, the CAC-40 has experienced several market corrections. The most notable ones occurred in 2001, 2008 and 2020. The correction that occurred in 2008 was particularly severe, with the index losing over 50% of its value in a matter of weeks. These occurrences have been attributed to a variety of factors, from economic recessions to geopolitical events.
In conclusion, the France CAC-40 Index is a benchmark French stock market index composed of the top 40 companies based on market capitalization. It is seen as an indication of the prevailing sentiment in the French equity market and is monitored by Euronext, which publishes the index on a continuous basis. The index is not an underlying a futures contract although it is similar to other indices such as the S&P 500 or the Nikkei 225 and since its launch in 1988, has gone through several market corrections.
