What Is CAC 40, and Should I Invest in It?

CAC 40 is one of the stock market indices you’ll always see included in business news round-ups. It represents the overall performance and the economic health of Europe and France in particular.

When it officially launched in 1988, when it coincidentally was registered at an all-time low. An all-time high was recorded in September 2000. But what about the CAC 40 index now, and is it worth investing? Let's explore what purposes this index serves, how it is calculated, and what trading strategies can yield good profits.

What Is CAC 40 Index?

CAC 40 is a free-float capitalization-weighted index. It quotes 40 of the largest and most actively traded shares in France and is considered a measure of the economy and the Paris stock market. It is similar to what Dow Jones represents for the USA, FTSE 100 – for the UK, Nikkei 225 – for Japan, etc.

Originally, the acronym “CAC” meant “Compagnie des Agents de Change”. It was a group of brokers that operated the Paris Stock Exchange since at least the 16th century. The initial sentiment was transformed, but the acronym stayed.

Companies within the CAC 40 composition account for about 20% of market capitalization in Europe, which shows how influential it is. It is also tightly connected to the Euro Stoxx 50 index, where they have almost 20 companies in common. CAC often catches the attention of international investors, with almost half of CAC 40 shares are held by non-residents and a quarter – by investors outside of Eurozone.

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