What is the CAC40?
The CAC 40 is a stock indicator that tracks performance of 40 stocks listed on Euronext Paris, France’s largest stock exchange. The Cotation Assistee en Continuu 40 is a key benchmark in the French economy. It attracts attention from traders all over Europe and around the globe.
The CAC 40 was launched in 1987 and has a value of 1,000. It is a market capitalisation-weighted index. This means that the largest companies in the index receive a higher weighting, just like the German Dax and the FTSE 100.
About CAC40 constituents
The biggest constituents of the index according to weighting include oil giant Total, bank operator BNP Paribas, and luxury goods conglomerate LVMH. Here is how the CAC 40 sector composition looked on June 10, 2021.
How often does CAC 40 change companies?
The composition of CAC 40 companies may change each quarter if it is not reviewed by an independent steering board. This review is done to ensure that the index selection and weighting accurately reflect the market. Alstom, a French multinational rolling stock manufacturer, was added to the index in September 2020.
How is the CAC 40 calculated
The CAC 40 is calculated using a price return method. The current number of shares in each constituent’s index is multiplied with the closing price, and then divided by an index divisor. The base level and the initial capitalisation base are used to calculate the divisor.
What does the CAC40 price refer to?
The CAC 40 price indicates whether share prices are increasing or decreasing. The price of CAC 40 increases indicates that certain companies or groups of companies are seeing gains. This is reflected in the overall index’s price. If the CAC 40 price falls, it indicates that the index companies are experiencing a decrease in price.
The CAC 40 ranking uses a weighted average share price. Companies with higher weights will often have their share price fluctuations have an correspondingly greater impact on the larger index.
What is the CAC 40’s price?
There are many technical and fundamental factors that affect the CAC 40 price, including international influences and the behavior of the French and European economies. European Central Bank Monetary policy, foreign exchange rates, data releases and commodity prices can all have an impact on the CAC 40 price.
Although such drivers are expected to move the index in one direction, it is not guaranteed that it will. Therefore traders need to consider how the determining factors interact rather than focusing on any one factor. Here are some key points to remember when trading the CAC40.
Monetary policy, economic releases
The European Central Bank’s monetary policy is more accommodative than the rest. Interest rates fall, and so does the overall money supply. Credit opportunities also increase when they are more accommodating. This makes corporate debt more appealing to acquire and easier to service, which can lead to business growth and sometimes a rise in stock prices.
Economic data can also have an impact on trading decisions. Stock indices can be affected by inflation. It can reduce profit margins in different sectors, and can also be a risk factor for longer-term higher interest rates. Inflation fears caused a drop of 1.3% in the index in May 2021, when the prices of CAC 40 leaders like L’Oreal and LVMH were affected.
Individual company performance
Companies that are heavier in the index have a greater ability to move it than smaller constituents. Total, for example, is much more capable than Renault of changing the CAC 40 prices.
Sociopolitical events
Market demand can be affected by events such as the Great Recession or the coronavirus outbreak. The pandemic of 2020, for example, caused a dramatic decline in manufacturing activity and market demands. In March 2020, the CAC 40 fell 40% from its record high in February.
The CAC 40 average annual returns
The average annual return for the CAC 40 over the past ten years has been 4.6%. The average CAC 40 returns represent the annual profit that managed funds have made for investors in a given year.
Below are the annual returns for 2011-2020. You should remember that past performance is not a guarantee of future results.
CAC 40 Market Hours
The main trading hours of the CAC 40 are from 09:00 to 17:30 (CET).
Learn more about stock exchange hours.
How to trade the CAC40
You can trade the CAC40 in many ways. The most popular are derivatives like futures and options, CFDs, CFDs, and ETFs. You can get exposure to all 50 companies through any of these instruments.
CFDs 40
Contracts for Difference (CFDs), which are derivatives, take their price form the underlying market. In this case, the CAC 40. You can speculate about whether an index will rise or fall in value, even though you won’t be taking ownership.
Learn more information about CFDs.
Futures CAC 40
Futures contracts allow you to trade an asset at a fixed price and with a specific expiry date. CAC 40 contracts are different from most futures. They don’t have any underlying physical assets to exchange. An index is simply a number that represents a group or stocks.
40 options
CAC 40 options give you the option, but not the obligation to, buy or sell an index at a fixed price on a specific date.
You can trade CAC 40 options as soon as they become available. CFDs are the best way to do this.
CAC 40 stocks, ETFs
ETFs are investment instruments that hold several stocks. You can trade the CAC 40 via ETFs.
Stocks on the CAC40 can also be traded separately, giving you the opportunity to concentrate on specific sectors.
Learn more about trading shares with us.
How to reduce the CAC 40
The CAC 40 can be shorted by taking a position that the index is likely to fall. You can do this by shorting the CAC 40 contract, or selling short constituent stocks. A CAC 40 ETF could also be an option for traders. If you feel that CAC 40 stocks are overvalued, you can either buy Put options or a put option on a CAC40 ETF.
Learn more about Shorting a Market.
Can you invest in UK’s CAC 40?
The CAC 40 can be invested in in the UK indirectly through a combination ETF, mutual fund or index funds. You can also trade the security using the above-mentioned methods to make derivatives.
