The CAC 40 Index is regarded as the benchmark index for the performance of the Paris Stock Exchange. The index is managed by the Euronext exchange group, which owns a Pan-European exchange with operations in Paris, Amsterdam, Brussels and Lisbon. The CAC 40 index is a "free float market-capitalisation-weighted index that reflects the performance of the 40 largest and most actively traded shares listed on Euronext Paris," and "the most widely used indicator of the Paris stock market."
The acronym "CAC" originally stood for "Compagnie des Agents de Change," the name for the group that originally operated the Paris Stock Exchange. Stock trading by "agents de change," or stock brokers, reportedly existed in France since at least the 16th century. During the government of Napoleon, a "Compagnie de Agents de Change" was formed in 1801 with the launch of the Paris Stock Exchange, and a group of 71 officially recognised brokers was designated to carry out trading activities.
With the Stock Market Reform Act of January 1988, the Compagnie des Agents de Change was dissolved. In its place, the Société des Bourses Françaises was incorporated as a limited company. The historical "CAC" reference endured, and the CAC 40 index was officially launched on June 15, 1988 with a base value of 1,000 referent to its position as of December 31, 1987.
Its launch in France coincided with the introduction of electronic trading in the country, and the acronym "CAC" then came to stand for "Cotation Assistée en Continu," or Continuous Assisted (stock price) Quotation. The index reached an all-time high of 6922.33 in September 2000 and a record low of 893.82 in January 1988.
Top Companies Traded On The CAC 40
Among others, the top companies listed on the CAC 40 by market capitalisation include: Total, Sanofi, L'Oreal, L'VMH, BNP Paribas, AXA, Airbus Group, Danone, Orange and Vinci. The index represents a total market capitalisation of €1.1 trillion, and companies on the index range in market capitalisations from €5 billion to €105 billion.
Listing On The CAC 40
The composition and oversight of the index is carried out by "Le Conseil Scientifique." It is a steering committee whose members include representatives of French market regulator AMF (Autorité des Marchés Financiers), France's Central Bank and the French Treasury Department, academics and economists.
To appear on the index, stocks must meet market capitalisation and trading volume criteria on the Euronext Paris Exchange, and the issuers must maintain "significant" assets or a main decision-making headquarters in France. The nationality of issuers, however, is not considered a criterion.
Market capitalisation measurement is based on the free float of issuer shares and the index requires a minimum free float of 15%. As a market capitalisation-based index, the CAC 40 differs from some other major global indices, such as the Dow Jones Industrial Average or the Nikkei 225, which are price-weighted indices.
A broad range of industries are included on the CAC 40, representing a significant portion of the French economy. The sectors widely represented on the index include hotels, airlines, chemicals, telecommunications, industrial materials, steel, banking, insurance, electronic equipment, construction, computer software, supermarkets, aerospace and defense, electric utilities, medical instruments and supplies, telecommunications, oil and gas, food and beverages, personal products, building materials, publishing, apparel, tires, automakers, retail, pharmaceuticals, real estate, semiconductors, water, media and entertainment.
The CAC 40 was initially devised with an aim to facilitate trading of derivatives. In addition to representing the 40 top issues on the Paris Exchange, the index is used as an underlying reference for options and futures, funds, exchange traded funds and structured products.
France's derivatives markets, MATIF and MONEP, began trading in CAC 40 futures and options on futures contracts in the months after its launch. The CAC 40 value is published on a continuous basis every 30 seconds to help facilitate trading in these instruments.
CAC 40 In Europe And The World
Stocks listed on the CAC 40 account for approximately 20% of market capitalisation in the eurozone. Stocks from the CAC 40 hold a representation of approximately 36% on the Euro Stoxx 50 index of leading European equities, with 19 of its companies appearing there. About 45% of CAC 40 shares are held by non-residents, and more than 25% of CAC 40 shares are held by non-Euro area investors.
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