CAC 40 Definition: The CAC 40 (Cotation Assistée en Continu) is France’s flagship stock market index, tracking 40 large-cap companies listed on Euronext Paris by free-float adjusted market capitalization. Launched in 1987 with a base value of 1,000, it serves as the primary benchmark for French equity performance and a key gauge of the eurozone’s second-largest economy. The CAC 40 is heavily weighted toward luxury goods (LVMH, Hermès, Kering), energy (TotalEnergies), and pharmaceuticals (Sanofi) — making it more globally-oriented than indices focused on domestic companies, with roughly 80% of CAC 40 revenue generated outside France.
What Is the CAC 40?
The CAC 40 is the French equivalent of Germany’s DAX 40 or the UK’s FTSE 100. Its name stands for “Cotation Assistée en Continu” — French for “Continuous Assisted Quotation” — a reference to the electronic trading system the index was created to support. The index is maintained by Euronext Paris.
The CAC 40’s defining characteristic is its luxury sector concentration. France dominates global luxury goods through three mega-cap companies: LVMH (parent of Louis Vuitton, Dior, Tiffany, Sephora, Moët-Hennessy), Hermès International (the eponymous luxury brand), and Kering (parent of Gucci, Yves Saint Laurent, Balenciaga). Together, these three companies account for roughly 25–30% of CAC 40 weight, more than any other index allocates to a single sector outside of U.S. technology in the Nasdaq 100. The luxury concentration means the CAC 40 is unusually sensitive to Chinese consumer spending — LVMH alone derives roughly 35% of revenue from Asia.
How the CAC 40 Is Calculated
The CAC 40 uses free-float-adjusted market capitalization weighting with a 15% cap on any single component. The cap prevents LVMH — which has periodically exceeded 15% of unconstrained index weight — from disproportionately dominating performance.
Eligibility requires listing on Euronext Paris, sufficient liquidity (the top 40 stocks by trading volume from a pool of 100), and free-float adequacy. Unlike the FTSE 100, which requires UK incorporation, the CAC 40 accepts companies headquartered anywhere as long as they meet the trading criteria — making the index broader in geographic representation than its name suggests. Airbus, for example, is a CAC 40 component despite being domiciled in the Netherlands.
- Calculate each component’s free-float market cap — share price multiplied by free-float adjusted shares outstanding.
- Apply the 15% single-company cap — if any company exceeds 15%, weight is reduced and excess redistributed.
- Sum capped weights — total weighted market value of the index.
- Divide by the CAC divisor — calibrated to maintain index continuity through component changes.
Worked example: Following the 2008 financial crisis, the CAC 40 fell from approximately 6,000 in mid-2007 to 2,500 in March 2009 — a 58% decline. The recovery took 14 years: the CAC 40 finally surpassed its 2007 peak in February 2023, reaching new all-time highs above 7,500 in 2024 driven by luxury sector outperformance and resilient European earnings. The recovery period highlights how index performance can lag economic activity when sector concentration creates structural headwinds.
CAC 40 vs. DAX 40 vs. Euro Stoxx 50
| Aspect | CAC 40 | DAX 40 | Euro Stoxx 50 |
|---|---|---|---|
| Country | France (and others) | Germany only | Eurozone (multiple) |
| Components | 40 | 40 | 50 |
| Return type | Price return | Total return (dividends reinvested) | Price return |
| Sector skew | Luxury, energy, pharma | Industrial, auto, chemical | Diversified eurozone |
| Single-company cap | 15% | 10% | 10% |
Why Is the CAC 40 Important for Traders?
The CAC 40 is the most-traded French equity index and a key gauge of European luxury and consumer sentiment. The index’s heavy luxury exposure makes it uniquely sensitive to Chinese consumer trends — when Chinese luxury demand contracts, LVMH, Hermès, and Kering all suffer disproportionately, dragging the entire index. Conversely, Chinese reopening or stimulus tends to drive sharp CAC 40 rallies.
The index gained 28% in 2023 as European earnings stabilized and luxury demand recovered, then traded sideways in 2024 as Chinese consumer weakness persisted. LVMH alone fell more than 25% from its 2023 peak as Chinese luxury spending slowed, demonstrating how concentrated sector exposure can create index-level volatility even when broader European economic indicators remain stable.
The risk is sector concentration and French political instability. When French elections produce uncertain outcomes — as in the June 2024 snap election that produced a hung parliament — the CAC 40 typically underperforms other European indices. The CAC 40 fell 7% in the week following the 2024 election announcement, far worse than the DAX 40’s 2% decline over the same period. On PrimeXBT, French index CFDs let traders express directional views on European luxury and consumer sectors without buying individual stocks.
Key Takeaways
- The CAC 40 tracks 40 large-cap companies listed on Euronext Paris by free-float adjusted market capitalization, with a 15% single-company cap to limit concentration.
- LVMH, Hermès, and Kering — three luxury goods companies — collectively account for roughly 25–30% of CAC 40 weight, making the index unusually sensitive to Chinese consumer spending.
- The CAC 40 fell 58% from mid-2007 to March 2009 and took 14 years to reclaim its 2007 peak — finally surpassing it in February 2023 driven by luxury sector outperformance.
- Roughly 80% of CAC 40 revenue is generated outside France, meaning the index reflects multinational corporate performance more than the domestic French economy.
- The CAC 40 fell 7% in the week following the June 2024 snap election announcement — far worse than the DAX 40’s 2% decline — demonstrating sensitivity to French political uncertainty.
