The CAC 40 tracks 40 large, actively traded companies in the Euronext Paris universe. Learn its selection, 15% cap, returns, and risks.
The CAC 40 is a free-float-market-capitalization-weighted price index of 40 large and actively traded companies from the Euronext Paris market universe. Euronext ranks eligible companies using both regulated turnover and free-float-adjusted market capitalization, then applies a buffer that favors existing constituents near the selection boundary. The index is a French-market benchmark, but a constituent does not have to be incorporated in France.
The CAC 40 measures the price performance of 40 prominent companies in the CAC index universe. The current rulebook centers the universe on companies assigned Euronext Paris as their market of reference, subject to eligibility and liquidity requirements. Special rules address companies that change reference market after a merger or similar event.
The distinction between market and domicile matters. A company can be associated with the Paris market while its issuer country is elsewhere. It can also earn much of its revenue outside France. Analysts should therefore distinguish among:
Selection occurs in several stages:
The buffer reduces unnecessary turnover. A non-constituent ranked 38th does not automatically replace an existing constituent ranked 39th.
Liquidity thresholds differ between the annual and quarterly processes and between current constituents and potential additions. This is why a current constituent list cannot reveal the complete selection methodology.
The simplified capped free-float market value of company (i) is:
where:
The simplified constituent weight is:
Euronext calculates capping factors so that a constituent has a maximum weight of 15% at a review. The cap is not a continuous ceiling: subsequent price movements can push a company’s weight above or below its review-date weight.
Assume a simplified uncapped portfolio with four companies:
| Company | Full market value | Free-float factor | Free-float market value | Uncapped weight |
|---|---|---|---|---|
| A | EUR 180 billion | 50% | EUR 90 billion | 45% |
| B | EUR 100 billion | 80% | EUR 80 billion | 40% |
| C | EUR 40 billion | 50% | EUR 20 billion | 10% |
| D | EUR 20 billion | 50% | EUR 10 billion | 5% |
| Total | EUR 340 billion | EUR 200 billion | 100% |
Company A is largest by full and free-float market value. In the actual 40-company index, any weight above the 15% review cap would be reduced through a capping factor and the remaining weights rescaled. This four-company example shows the pre-cap calculation; it does not reproduce final CAC 40 weights.
Suppose three constituents have final review weights of 15%, 14%, and 8%, while the other 37 constituents make up 63%. If their one-period returns are 2%, -1%, 3%, and 0.5%, respectively, the simplified index return is:
The example excludes dividends, taxes, corporate actions, intraperiod weight changes, and transaction costs.
A simplified level formula is:
The divisor (D_t) converts the portfolio’s capped free-float market value into index points. Corporate actions and constituent changes can require divisor adjustments so that a mechanical change is not reported as investment performance.
The CAC 40 has a base date of December 31, 1987 and a base value of 1,000. It began publication on June 15, 1988. The base value is only a measurement convention: comparing the point level of CAC 40 with DAX or another index does not compare market size or historical performance.
The current rulebook schedules quarterly reviews effective after the market close on the third Friday of March, June, September, and December. September is the annual review, when the full share count, free-float factor, and cap process is refreshed. Quarterly rules define when material changes to shares or free float are incorporated.
Mergers, takeovers, delistings, suspensions, and other corporate events can also change the index between scheduled reviews. Historical analysis should use the constituents, share counts, free-float factors, capping factors, and divisor effective on the relevant date.
| Series | Ordinary cash dividends | Main use |
|---|---|---|
| CAC 40 | Excluded | Measuring share-price performance |
| CAC 40 Gross Return | Reinvested before withholding-tax assumptions | Gross dividend-inclusive comparison |
| CAC 40 Net Return | Reinvested after methodology-specified withholding-tax treatment | Standardized net dividend comparison |
Suppose the price index moves from 8,000 to 8,240:
If the official gross-return series gains 4.0% over the same dates, use that published return rather than adding a quoted dividend yield mechanically. Payment timing, reinvestment, weights, and corporate actions affect the result.
| Index | Main scope | Constituents | Notable construction feature |
|---|---|---|---|
| CAC 40 | Euronext Paris large, actively traded companies | 40 | Combined turnover and free-float-size ranking; 15% review cap |
| DAX | Major German-listed companies | 40 | Free-float market-cap weighting under Deutsche Boerse rules |
| IBEX 35 | Highly liquid securities traded in Spain | 35 | Liquidity-led selection and stepped free-float factors |
| FTSEurofirst 300 | Developed European large companies | 300 | Broad multicountry developed-Europe coverage |
These indexes answer different questions. CAC 40 is narrower than a pan-European benchmark and may have materially different company, sector, domicile, and currency exposures.
The CAC 40 is not a complete French equity-market index and does not measure the entire French economy. Smaller listed companies, private businesses, employment, production, and household activity are not weighted into the index.
This article is educational and does not provide investment, tax, or legal advice or recommend an index product, security, derivative, or allocation.