What is the CAC 40 Index?
The CAC 40 Index is the benchmark tracking index for the Paris Bourse.
How Does the CAC 40 Index Work?
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 Does the CAC 40 Index Matter?
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'Oréal, Michelin, and PSA Peugeot Citroën.