The Cotation Assistee en Continu (CAC) 40 meaning Continuous Assisted Quotation for 40 stocks is the market capitalization weighted benchmark stock market index for France with a base value of 1000 set on 31st December 1987.
The index is calculated using the Weighted Average Market Capitalization methodology where the price multiplied by the free float gives the market capitalization of its constituents. The base value of the index is 1000 on 31st December 1987. The weightage of each company is arrived at by dividing the market capitalization of each company with the total market capitalization of all the 40 companies. The larger the market weightage of the company the larger is the impact due to 1% change in its price on the index.
The index composition is reviewed on a quarterly basis after the close of the third Friday of March, June, September and December, from stocks listed on the Euronext Paris stock exchange by an independent Index Steering Committee named Conseil Scientific. If any changes are made they are implemented in the index after a minimum period of two weeks. The companies are required to have a free float adjusted annual velocity of at least 20% as the eligibility criteria for selection.
Oil and Gas constitute 12.62% followed by Healthcare at 12.02%, Banks at 11.45%, Industrial Goods and Services at 11.42%, Personal and Household Goods at 7.56%, Construction and materials at 6.94%, Food and Beverage at 5.11%, Utilities at 4.6%, Chemicals at 4.32%, Media at 4.26%, Insurance at 3.94%, Automobiles and Parts at 3.51%, Retail at 3.28%, Technology at 2.47%, Telecommunications at 2.29%, Real Estate at 2.11%, Basic Resources at 1.35% and Travel and Leisure at 0.73% for the sector allocation in the index.
The CAC 40 has given a return of 21.24% on a year on year basis and has gained 1.57% on a month on month basis. The index reached an all-time high of 6922.33 during the dot com bubble in September 2000. The index has a Price to Earnings ratio of 26.7 in the current scenario. The CAC 40 along with the DAX, Nasdaq and the Dow is one of the best performing equity indices over the last one year. Total company has the highest weightage of 11.74% in the index followed by Sanofi with a weightage of 10.39%, BNP Paribas with 6.43%, LVMH with 4.25%, Schneider Electric at 4.08% and AXA at 3.94% while others have less than 3.94% weightage each in the index.
Table 1. CAC 40 Constituents