The CAC 40 (Cotation Assistée en Continu) was established in 1987 as France’s primary stock market index. It includes the 40 largest companies listed on Euronext Paris. Among the top companies in the index are global leaders in their industries, such as LVMH (luxury goods), TotalEnergies (energy), L’Oréal (cosmetics), Sanofi (pharmaceuticals), and BNP Paribas (banking).
Over the past few years, the CAC 40 index has shown remarkable growth—increasing by approximately 45% between 2019 and 2024, reaching historic highs above 7,000 points. This performance reflects the strong position of French firms in the luxury goods sector and the growing influence of the technology sector.
Calculation Method
The CAC 40 is a free float market-cap weighted index, meaning the impact of individual companies is proportional to their market value available for public trading. The maximum weight of any single company is capped at 15%, ensuring better diversification. The index composition is reviewed quarterly, with market capitalization and trading liquidity as the primary criteria.
The index also has a Total Return version, which includes dividends, offering a more comprehensive view of the return for investors. This is particularly important since many French companies distribute significant dividends.
Popularity Among Traders
The CAC 40 is not only a barometer of the French economy but also a key indicator for the entire eurozone. The index shows a high correlation with other European indices, especially the German DAX.
A unique feature of the CAC 40 is its significant exposure to the luxury goods sector (e.g., LVMH, Kering, Hermès), making it sensitive to global consumption trends, particularly in Asia. The index is also strongly influenced by European Central Bank (ECB) monetary policy changes and fluctuations in the EUR/USD exchange rate.
Trading CAC 40 CFDs
Contracts for Difference (CFDs) on the CAC 40 are popular among active traders. The main advantage of CFDs is the ability to use leverage, allowing investors to control a larger position with a smaller initial capital. Standard leverage for indices is often 1:20 or 1:30, meaning traders can control positions 20 or 30 times the value of their invested capital.
CFD trading also enables short selling, allowing traders to profit from index declines. This is especially valuable during periods of heightened volatility or market corrections. Additionally, CFD brokers typically offer trading outside regular market hours, enabling rapid responses to global events.
However, it’s essential to note the risks associated with CFD trading. Leverage works both ways—it can amplify potential gains but also losses. Additionally, holding positions overnight incurs financing costs (swaps), which can significantly affect the profitability of long-term positions.
Trading CAC 40 Futures
Futures contracts on the CAC 40 are standard derivatives traded on Euronext Paris. They are available in two main variants: standard (multiplier €10 per point) and mini (multiplier €1 per point). Futures are characterized by high liquidity and price transparency, with clearing handled by LCH.Clearnet.
Futures trading requires higher initial capital than CFDs but offers more predictable transaction costs. Contracts have fixed expiration dates, necessitating regular rolling of positions for long-term investments. It’s also worth noting that futures are only available during market hours, limiting responses to events outside trading sessions.
Investing in CAC 40 via ETFs
Exchange-Traded Funds (ETFs) provide the simplest way to gain exposure to the CAC 40 index. Popular funds like Lyxor CAC 40 ETF or Amundi CAC 40 UCITS ETF feature low management fees (TER around 0.25% per year) and high liquidity on the secondary market. ETFs are available in accumulating versions, which automatically reinvest dividends, making them attractive for long-term investors.
Investing in ETFs does not require active position management or concern over expiration dates, as with futures. However, investors should consider the possibility of a tracking error, which refers to deviations in the fund's performance from the underlying index. For non-eurozone investors, additional factors include currency conversion costs and exchange rate risk.
The Impact of the Largest Companies on the Index
We will now examine the impact of the largest companies on the CAC 40 index. For the calculations, the market capitalization levels provided by Investing.com will be used. If these capitalization levels are based on the Free Float methodology, then the results of our analysis should be accurate. We will explore which companies play a key role in shaping the index and assess the significance of the largest entities in the context of its overall dynamics.
Table 1: Impact of the 5 Largest Companies on the Index
Company | Price (EUR) | Capitalization (Billion EUR) | Share (%) |
Louis Vuitton | 629.30 | 314.11 | 14.12 |
Hermes International | 2,305.00 | 240.78 | 10.82 |
L'Oréal | 337.40 | 180.36 | 8.11 |
Schneider Electric | 239.40 | 134.33 | 6.04 |
Airbus Group | 154.38 | 122.10 | 5.49 |
SUM | 44.58 |
Source: investing.com, own calculations, as of December 30, 2024
The five largest companies in the CAC 40 index, led by Louis Vuitton, play a crucial role in shaping its value, accounting for over 44% of its total weight. Notably, luxury goods companies such as Louis Vuitton, Hermes International, and L'Oréal collectively represent nearly one-third of the index's share. Their dominance underscores the importance of the luxury goods sector in France's economy.
Table 2: Impact of the 10 Largest Companies on the Index
Company | Price (EUR) | Capitalization (Billion EUR) | Share (%) |
Louis Vuitton | 629.30 | 314.11 | 14.12 |
Hermes International | 2,305.00 | 240.78 | 10.82 |
L'Oréal | 337.40 | 180.36 | 8.11 |
Schneider Electric | 239.40 | 134.33 | 6.04 |
Airbus Group | 154.38 | 122.10 | 5.49 |
TotalEnergies SE | 52.60 | 120.09 | 5.40 |
Sanofi | 93.14 | 116.80 | 5.25 |
EssilorLuxottica | 232.30 | 106.16 | 4.77 |
Safran | 210.40 | 88.45 | 3.98 |
Axa | 34.12 | 72.09 | 3.24 |
SUM | 67.22 |
Source: investing.com, own calculations, as of December 30, 2024
The ten largest companies in the CAC 40 index contribute over 67% of its total value, showing that a relatively small number of firms dominate its composition. Besides luxury goods, significant contributions come from energy (TotalEnergies SE), pharmaceuticals (Sanofi), and aerospace (Airbus Group and Safran), illustrating the diversity of the French economy.
Table 3: Companies Contributing 70% to the Index
Company | Price (EUR) | Capitalization (Billion EUR) | Share (%) |
Louis Vuitton | 629.30 | 314.11 | 14.12 |
Hermes International | 2,305.00 | 240.78 | 10.82 |
L'Oréal | 337.40 | 180.36 | 8.11 |
Schneider Electric | 239.40 | 134.33 | 6.04 |
Airbus Group | 154.38 | 122.10 | 5.49 |
TotalEnergies SE | 52.60 | 120.09 | 5.40 |
Sanofi | 93.14 | 116.80 | 5.25 |
EssilorLuxottica | 232.30 | 106.16 | 4.77 |
Safran | 210.40 | 88.45 | 3.98 |
Axa | 34.12 | 72.09 | 3.24 |
BNP Paribas | 58.73 | 66.35 | 2.98 |
SUM | 70.20 |
Source: investing.com, own calculations, as of December 30, 2024
The companies responsible for 70% of the CAC 40’s total value are primarily leaders in their sectors, representing luxury goods, energy, pharmaceuticals, and finance. The inclusion of BNP Paribas as the sole banking institution in this group highlights the relative stability of the French financial sector, as well as its smaller role compared to the rapidly expanding technology and industrial companies.
Conclusion
The analysis of the largest companies' impact on the CAC 40 index shows that its structure is dominated by a few key firms, especially from the luxury goods, energy, and pharmaceutical sectors. The five largest companies account for nearly half of the index's total value, while the top ten cover over 67%. This concentration underscores the strategic importance of a few industries to the French economy and highlights the influence of global brands in maintaining the stability and growth of the financial market.
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