CAC 40 Definition: History and How the Index Works

CAC 40 definition: The CAC 40 is a stock market index that brings together forty French companies listed on the stock exchange. CAC stands for Cotation Assistée en Continu (continuous assisted quotation), meaning its value changes constantly. The number 40 refers to the number of French companies that make up the index.

What Is the CAC 40? Definition

The CAC 40 stock index is calculated every day from the price movements of the 40 shares listed on Euronext Paris.

The CAC 40 is a stock index of great importance to the French economy. When the CAC 40 rises, it signals that the economic climate is improving. The CAC 40’s daily trading session starts at 9:00 a.m. and ends at 5:30 p.m. on business days. It is also updated every 15 seconds in real time.

The CAC 40 index was launched on December 31, 1987, with a base value of 1,000 points.

If this topic interests you, also see “MSCI World” and “Bull Run Definition“.

CAC 40 Synonyms

Here are the terms that also refer to the CAC 40:

France 40;
CAC40;
France40;
Cotation Assistée en Continu;
K40;
CAC 40 Index.

CAC 40 Etymology

CAC is an acronym for Cotation Assistée en Continu. The number 40 represents France’s most significant companies.

Key CAC 40 Terms and Vocabulary

CAC 40 constituent – definition: A CAC 40 constituent is a listed company included in the list of France’s 40 largest groups.
CAC 40 index level – definition: The CAC 40 index level shows how this stock index has moved over a given period. Changes in the index level mirror changes in the index’s value. For example, if the CAC 40 rises from 5800 to 5801, the CAC 40 has gained 1 point.
CAC 40 index rise – definition: As the name suggests, a rise in the CAC 40 index is an increase in its level. Going back to the example we just used, the CAC 40 moved from 5800 to 5801, meaning a 1-point rise.
CAC 40 index fall – definition: A fall in the CAC 40 index is a decrease in the index level. For example, when the index drops from 5600 to 5550, the index has fallen.
Market cap of a CAC 40 company – definition: A company’s market capitalization is its actual market value. It is calculated by multiplying the number of shares by the price of one share. Market cap determines how much capital is needed to buy all of a company’s shares.
Gross return or CAC 40 GR – definition: Gross return (GR) is the total return including gross dividends before reinvestment and before tax.
Net return or CAC 40 NR – definition: Net return is a stock index based on the CAC 40 with net dividends reinvested.

Other Definitions

CAC is an abbreviation you come across in many places. For example, in French it refers to a Commissaire aux Comptes (statutory auditor), who is responsible for the financial and accounting information companies produce.

CAC is also the name of an accounting firm, standing for “Conseils et Applications Comptables”.

CAC also stands for “Centrales des Artisans Coiffeurs”.

What Is Euronext? Definition

Euronext is a company that operates many stock markets in Europe and is present in 6 European countries. As a market operator, it plays an important role in running stock exchanges. As a result, the AMF (Autorité des Marchés Financiers) closely monitors its activities.

Euronext Paris is the regulated market of the Paris stock exchange. Euronext Paris ensures the overall functioning of the Paris stock exchange, under the supervision of the AMF.

How Does the CAC 40 Work?

As mentioned in its definition, the CAC 40 is made up of 40 companies, selected from around a hundred French companies. These companies’ shares have the highest trading volumes on the European exchange Euronext. Euronext calculates the CAC 40 continuously, monitors it and publishes its value.

Since each stock’s weight in the index is based on the size of its market capitalization, the index generally reflects the overall economic trend of France’s large companies.

What Is a CAC 40 Future? Definition

Simply put, a CAC 40 future is a short-dated contract based on the CAC 40 index. CAC 40 futures are quoted in points, with each point worth €10. So for a contract price of 3500 points, the value is €35,000.

Like all futures contracts, the CAC 40 future is cash-settled when the contract expires. This type of contract can be traded until the 3^rd Friday of the expiry month. It is worth knowing that there are around 14 rolling expiries available for trading.

What Is a CAC 40 Point?

A CAC 40 point is the unit of measurement for this stock index. It moves relative to its original base of 1,000 points, set on December 31, 1987. For example, if the CAC 40 is at 4000 points, it means that €1,000 invested in 1987 in a product indexed to the stock index would be worth €4,000.

What Is CAC 40 Index Trading?

Trading the CAC 40 index means opening and closing buy and sell positions in order to make gains. For example, a trader expects the CAC 40 to move from 4500 to 5000 points. They open a buy order. If they are right, they make a profit of 500 points.

What Is a France 40 Chart? Definition

A CAC 40 chart is a graph illustrating how this index has moved. The CAC 40 chart is an indicator showing how the index has evolved over a dozen or so years. To check how this index is moving, you need to use a trading platform such as MetaTrader 4 or MetaTrader 5, which are offered by today’s most popular brokers.

What Is a Sector Represented in the CAC 40?

A sector represented in the CAC 40 is a group of industrial or economic activities within the CAC 40 that share the same characteristics. One of the most important sectors in the CAC 40 is consumer discretionary, which covers non-essential goods and services such as electronics, hotels and restaurants.

The CAC 40 also includes other sectors such as consumer staples, technology, real estate and many more.

What Is CAC 40 Correlation? Definition

CAC 40 correlation is an indicator showing how the index’s prices move relative to other markets. Correlation describes how certain markets behave, moving at the same time in the same direction or in different directions.

What Is the Correlation Between the CAC 40 and Other Stock Indices?

The correlation between the CAC 40 and other stock indices, such as those on Euronext, is an indicator describing the strength of the relationship between two variables. It is expressed as a percentage.

When it is 100% or positive, it shows a maximum direct relationship between the indices. This means that when one index moves 1%, the second index also moves 1% in the same direction.

When there is no correlation, or it reads 0%, it shows there is no relationship. So any change in one index’s level will not affect the other’s.

Finally, when the correlation reads -100% or is negative, there is a maximum inverse relationship between the indices. So for a 1% move in one index, the other moves -1%, in the opposite direction.

What Is a CAC 40 Company? Definition

A CAC 40 company is a company included in the most important stock index of the Paris stock exchange. There are 40 companies in the CAC 40. They are France’s largest groups, usually with international operations and billions in revenue.

What Is a CAC 40 Shareholder? Definition

A CAC 40 shareholder is someone who holds one or more shares in companies included in the CAC 40. CAC 40 shareholders can be French residents or residents abroad.

Major CAC 40 shareholders include investment funds from large asset management groups such as BlackRock. Other major shareholders include the Arnault family, the French state and the Norwegian state.

Before the CAC 40 Index Was Created

The CAC 40 is actually a relatively recent stock index used to measure the financial health of the French economy. Before 1988, there was an INSEE index of the Paris stock exchange to measure performance, which increased fivefold in the 1920s and again in the 1950s, despite the geopolitical uncertainty during both of these periods of economic growth.

In the 1960s and 1970s, this trend came to an end as small investors gradually turned away from a Paris stock exchange in a lasting downtrend, and the share of French people owning shares fell by 7%.

But in the early 1980s, despite a gloomier economic backdrop, the index returned to an uptrend as share prices recovered. Financial globalization was taking its first steps, and François Mitterrand’s banking reforms, with the 1984 Banking Act, helped the Paris stock exchange take off, as London’s did in 1986, leading to the creation of the CAC 40 index in December 1987.

The Birth of the CAC 40 Index

The CAC 40 was born in the wake of the October 1987 crash. The index changed the monopoly on financial and stock market transactions.

These transactions used to be handled directly by ministerial officers and stockbrokers (agents de change). Following Law 88-70 of January 1988, this role was handed to brokerage firms (sociétés de Bourse). In fact, at that time CAC stood for something else: Compagnie des Agents de Change.

The CAC 40 index was set with a base value of 1,000 points on December 31, 1987. It hit its low on January 29, 1988 at 893.82 points. But it was only on June 15, 1988 that the CAC 40 truly came into being. It ended its first year at 1,573.94 points.

The Speculative Bubble and the 2000 Record

Thanks to the speculative bubble in telecoms, media and technology stocks, the CAC 40 hit an all-time high of 6,944.77 points on September 4, 2000, before falling back to 2,401.15 points on March 12, 2003, its lowest level since 1997, due to production overcapacity in Europe and the United States.

Since early December 2003, like the main global indices, the CAC 40 has taken into account both the market capitalization of its constituent companies and their free float, i.e. the shares actually available on the market.

Several Bull and Bear Phases from 2007 to 2011

The CAC 40 then rose to 6,000 points on May 2, 2007, after gaining 150% in just four years, and even reached 6,168.15 points on June 1 of the same year. In July 2007, the CAC 40 constituents accounted for more than 70% of the total capitalization of the Paris stock exchange, i.e. €1,300 billion, before falling back below €1,000 billion in early 2008.
In January 2008, the index turned down again, falling below 4,200 points in July and then 3,200 in October. During this market crisis, the index lost more than 43.5% from January and even lost more than 22% during the week of October 6–10, 2008. The index recorded its biggest one-day gain since its creation on October 13, 2008, rising 11.8% to 3,531.50 points, while its biggest drop had come shortly before, on October 6, 2008, with a fall of 9.04% to 3,711.98 points.
2008 was therefore the worst year in the CAC 40’s history, with a fall of 42.68%, the steepest since its creation. But in 2009 it found some stability after hitting a low of 2,465.46 points in March. It then climbed until the 2011 crash.
As of August 3, 2011, the CAC 40’s market capitalization was €873 billion.

The CAC 40 Price Recovers

After the crash of July and August 2011, the CAC 40 returned to an uptrend, moving up between 4,000 and 5,700 points. Its market capitalization climbed back to €1,500 billion in 2017 and even reached €1,673 billion in April 2018.
From 2017, the CAC 40 began to include tech companies, with Atos joining in March, then STMicroelectronics in September of the same year and finally Dassault Systèmes in September 2018. In June 2019, still in the same sector, Thales joined the index. The tech sector thus carved out a place in an index long dominated by financial and industrial stocks.
In 2019, the CAC 40 recorded a record payout of €60.2 billion, including €49.2 billion in dividends and €10.7 billion in share buybacks. This was followed by the biggest fall in the index’s history on March 12, 2020, with a drop of 12.28% due to the health crisis.

The 2020 Crash and the Impact of Covid on the CAC 40

While the Paris index had been trading close to 6,000 points since late 2019, thanks in particular to stocks such as Kering, Hermès, ArcelorMittal, L’Oréal and LVMH, a first sharp downtrend was recorded between January 27 and 31, with a 5% loss after the first Covid cases were announced in France. But on Wednesday, February 19, the CAC regained ground and climbed back to 6,111.24 points.
However, the sharp rise in infections in Europe, starting with Italy, led to a 3.94% loss in the index from February 24, and the month stayed negative, particularly during the week of March 9–13, with one of the worst falls recorded on the Monday, a loss of 8.39% in a single session, notably after a 30% fall in the price of oil.
On Thursday, March 12, the CAC 40 suffered its biggest ever loss, falling 12.28% to close the session at 4,044.26 points, the worst session since the index was created. This fall was driven largely by rumors of a lockdown, confirmed that evening by Emmanuel Macron. The losses continued over the following days, with a drop to 3,754.84 points on Thursday, March 18. In just one month, the Paris index fell 40%.
However, there was a first upward correction of 20% at the end of March, then a second of the same size in November after the vaccine approval announcements.
In April 2025, the Paris stock exchange’s flagship index managed to return to its pre-crisis peak, thanks to hopes of economic recovery around the world and the lifting of lockdown measures. The index reached 6,131.34 points and is now close to its 2007 record, with one of the best performances of all global stock markets since the start of the year.

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CAC 40 Definition: Conclusion

You now know everything you need to know about the CAC 40. Understanding this stock index is very important for anyone who wants to trade. Investing in the CAC 40 can be very rewarding for traders, as the index is weighted, meaning each stock’s weight in the index is set according to the size of its market capitalization.

The Paris stock exchange index offers many advantages for investors. First, it is an important analysis tool for trading and investing. It can also be traded as a CFD or futures contract. The CAC 40 has had periods of rapid growth, such as between 2003 and 2006, when it rose by 124%.

The CAC 40 is also made up of French companies. For a trader, this is an important detail, as information is easier to find. In short, it can help an experienced trader increase their gains.

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