CAC 40 Index
What it is:
How it works/Example:
Started in December of 1987 with a value of 1000, the CAC 40 is comprised of the 40 largest and most liquid stocks trading on the exchange. The CAC 40 is a float-weighted index, meaning that the weightings of each of the index's components are determined by the value of shares outstanding to the public. This prevents a large company that only issues a small amount of its shares from having a disproportionate amount of influence on the index's value. Similar to how the S&P 500 is a subset of the S&P 3000, the CAC 40 is a subset of the larger SBF (Societe des Bourse Francais) 250.
Why it matters:
France has one of Europe's leading economies, so the CAC 40 is a strong indicator of economic health over all of Europe. Some companies tracked on this index that have significant operations in the United States include L'OrÃ©al, Michelin, and PSA Peugeot CitroÃ«n.