What is CAC40?
The COC 40 Stock index measures the performance of the 40 most valuable stocks listed on Euronext Paris. This is France’s largest stock trading exchange. The Cotation Assistee en Continuu 40 index, also known as the CAC 40, is a key benchmark for French economic activity and attracts trader interest from Europe and beyond.
CAC 40, which was launched in 1987 with a $1,000 value, is a market Capitalisation Weighted Index. This means that companies with the highest capitalization are given a greater weighting.
About CAC40 components
The largest components of the index by weighting are oil giant Total and banking operator BNP Paribas. Luxury goods conglomerate LVMH is Louis Vuitton. Here’s how CAC 40 looked in June 2020.
How often do CAC40 companies make changes?
When the composition of CAC 40 companies is reviewed by an outside steering committee, it can be possible for them to change quarterly. This review is necessary to ensure that the weighting of the index and its selection are correct. Alstom is a French multinational rollingstock manufacturer that was added to the Index in September 2020.
How is CAC 40 calculated
The CAC 40 has a price-return basis. Calculation is done using the current shares of each constituent in the index multiplied by their closing prices and then divided by an Index Divisor. The base level and initial capitalisation base of each index are used to calculate the divisor.
What does the CAC40 Price mean?
The CAC 40 prices indicate whether the share price of companies in the index is rising or falling. If the CAC 40 prices are rising it means that particular companies or groups of corporations are enjoying gains. The overall index’s value will also rise if the CAC 40 prices increase. The reverse is true: if the CAC 40 prices are falling, it means that companies in the index are experiencing a drop in price.
CAC 40 rankings are based upon a weighted-average of share prices. This means that companies with greater share prices will have an outsized effect on the wider index.
What influences the CAC40’s price?
The CAC 40 prices are affected by several technical and fundamental drivers, as they are related to the French economy and European economy. European Central Bank monetary policy can have a significant effect, as can foreign exchange rates or economic data releases.
These drivers may move the index in a given direction but it is possible for the move to not take place. Therefore traders should think about how all the factors play together and not focus on any one. Here are some important points to be aware of when trading CAC40.
Monetary policies and economic releases
The European Central Bank’s monetary policy tends to be accommodative. This means that interest rates will fall and overall credit and money supply opportunities will increase. This means that corporate debt is more accessible and less expensive to service, creating opportunities for business growth as well as boosting stock markets.
Economic Data can also influence trading decisions. Stock indices could be hit by inflation as it can lead to a reduction in profit margins and may also be seen as a possible forebear for longer-term, higher interest rates. Inflation fears, for example, caused the price to drop by 1.3% in one day in the wider index due to L’Oreal and L’MH being CAC 40 leaders.
Individual company performance
As stated, companies with the highest weight in the index are more able to move the index than smaller constituents. Total, for instance is far more capable of causing changes to the CAC40 prices than Renault.
Sociopolitical Events
Events such the Great Recession and coronavirus epidemic can all affect market demand in a way that is not predictable. For instance, the pandemic that struck 2020 resulted in a sharp drop in manufacturing activity as well as market demand. This saw the CAC 40 fall 40% in March 2020, after hitting a record high in February.
The CAC average annual returns are 40
The CAC 40’s average annual return over the last ten decades has been 4.6%. The CAC40’s average returns are basically what managed funds will have earned as profit for investors over a period of one year.
Below is a list of the yearly returns, 2011-2020. Don’t forget that past returns are not indicative of future performance.
Market hours
The main trading hours are from 9:00 – 17:30 (CET)
Find out more about stock markets hours.
How to trade CAC40
There are many ways you can trade CAC 40. The most common ones are derivatives, such as CFDs or futures and other options. ETFs are also available. These instruments all allow you to have exposure to all 50 company from one position.
CAC 80 CFDs
Contracts to differ (CFDs), or derivatives that derive the price from an underlying marketplace, in this case the CAC40. Although you won’t ever be able to take ownership of an asset you can speculate on its future value.
Learn to learn all about CFDs .
CAC40 futures
Futures contracts enable you to exchange an asset at set prices and on a particular expiry. CAC 40 contract do not have an actual physical asset to trade, as an index represents only a group of stocks.
40 options
CAC 40 options allow you to sell or buy the index at a predetermined price, on a given date.
CFDs would be the best option to trade CAC 40 options when they are available.
CAC40 stocks or ETFs
ETFs (investment instruments that hold multiple stocks) are another way to trade CAC 40. This is where you can get the shares from constituents of the index.
Alternatively, stocks listed on the CAC40 may be traded as an individual trade, allowing you to target specific areas of interest.
We can help you learn more about stock trading.
How to abbreviate the CAC 40
You can shorten the CAC 40 by taking a position that it will fall. This can either be done by shorting CAC40 contracts or by shorting constituent stock. Another option is for traders to short a CAC40 ETF. Options include the ability to buy Put options on stocks CAC 40 if they appear overvalued or buying a Put option for an ETF CAC 40.
Continue reading about shorting a market.
Can you invest in UK CAC 40?
You can invest indirectly in the CAC 40 UK via a combination ETFs mutual funds or Index funds. Or, you can trade the security via derivatives according to the above methods.
