(BFM Stock Exchange) – The Parisian star index will change composition this Monday, September 22. But since its creation at the end of the 1980s, the number of residents has remained the same 40. A figure far from 500 companies in the American S&P 500. This figure gives both a good overview of the French economy while being easy to reply by investors.

Born in 1988, the CAC 40 remains the reference index of the Paris Stock Exchange. This even if its alternative, the CAC 40 known as “GR” (for “big return” either “gross yield”), is sometimes more relevant to measure the performance of the Parisian place, because this index supposes that the dividends paid by companies are reinvested, like the German Dax.

The residents of this index have evolved a lot. Every quarter, the Euronext scientific council, the Paris Stock Exchange operator meets to determine its composition. Thursday, September 11, this body decided to join … Euronext which will take its first steps in the Parisian star index this Monday, September 22. This promotion of the pan -European stock market operator is to the detriment of the specialist outsourced customer relations Teleperformance, whose market capitalization dropped to 3.8 billion euros, the lowest of the CAC 40.

The last modification of the residents of the CAC 40 dates back to December 2024. And it was Bureau Veritas, which was promoted to the upper level, in place of Vivendi.

On the market capitalization side, LVMH is today the largest group in the Parisian square index, with 255.9 billion euros in market capitalization, ahead of Hermes (223.6 billion euros).

A simple question arises: why 40 companies? After all the flagship index of Wall Street, the S&P 500, has 500 companies, while the IBEX 35 of Madrid brings together (logically) 35 companies.

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Represent the economy and be easy to reply

The answer is, in a way, linked to the very concept of a large stock market index. This must be important enough to reflect both the health of a stock market place, but also of the French economy.

It must thus be diversified and therefore quite large while being able to be replicated without too much difficulty by the managers. This last point turns out to be crucial, in particular, for passive management, that is to say the investment in ETFs, funds which must reproduce the performance of the major stock market indices.

When questioned, Euronext explains that “the choice of 40 components makes it possible to represent in relevant way the main companies of the French economy while maintaining a portfolio of reasonable size, easy to reply for investors”.

This number of 40 companies also gives a good global view of the Paris Stock Exchange. According to companiesmarketcap.com data, CAC 40 market capitalization in its entirety represents between 80% and 90% (88% at the end of May) of that of listed French companies. This rate is ultimately quite close to that of the S&P 500 (82%) in New York, although the American index has 500 companies. Or the FTSE Mib of Milan which also brings together 40 companies for 80% of domestic capitalization.

Note that the Paris Stock Exchange has only a few hundred listed companies (more than 800 according to Euronext) against 375 for Milan. For the New York Stock Exchange, this number is around 5,000-6,000 (2,300 for the New York Stock Exchange, around 3,500 for the Nasdaq).

The split can change (briefly) the situation

If the CAC 40 has always been intended to include no more or less than 40 companies, it may temporarily happen that the index has some additional residents, for technical reasons.

This is in particular what happened during the split (“spinoff” in English) of Edenred, ex-filiale of Accor, in 2010, or more recently from Euroapi, also during a split, the group being from Sanofi, in 2022. As a reminder, a split occurs when a parent company introduces a subsidiary on the stock market by distributing shares of the subsidiary Introduced on the stock market.

“The CAC 40 can temporarily have more than 40 companies in specific cases, in particular during spin-offs operations. The processing of these operations follows the public rules applicable to the Euronext indices, available on our website,” explains Euronext.

These rules explain that in the event of the split of a company present on an index, companies from this split may remain in the index in question if they “meet the criteria” of the family of indices in question. According to these criteria, these companies must, in particular, have Euronext as a reference market, their courses must exchange in euros, or, another example, they must not be holdings of companies already admitted on Euronext (as is the case for Louis Hachette Group, Lagardère Holding).

In his answers to our questions, Euronext gave an example. “During the Vivendi Spinoff in December 2024, companies from this split (Vivendi, Louis Hachette, Havas and Canal+) were dealt with as follows. Vivendi, meeting the eligibility criteria of the CAC index family, remained in the index until the following revision (which occurred on December 17, the next day,” the stock market operator.

“Louis Hachette, Havas and Canal+, not fulfilling the eligibility criteria (in particular the requirement to be listed on Euronext Paris), were excluded from the index after a day of rating, in order to take into account the period of payment of the securities”, completes Euronext.

The CAC 40 has never changed, the Dax if

For the anecdote, the S&P 500 has 500 companies but 503 actions. Simply because some of its residents (alphabet, Newscorp, Fox Corporation) have several action classes included in the index.

Furthermore, if the CAC 40 has never modified the number of actions composing it, it may happen that an index does it. In any case, this happened with the Dax 30, the reference index of the Frankfurt Stock Exchange, which extended to 40 values ​​in September 2021 to become the Dax 40. Ten companies had then joined the large barometer of the German square with among them, Puma, Zalando and Airbus (which is listed in Frankfurt, in Paris as well as in Madrid, Bilbao, Barcelona and Valence).

The Frankfurt Stock Exchange then led a mini-revolution to get closer to international standards and have a more representative index of the Frankfurt Stock Exchange, with a wider coverage specter.

“A broader reference index means greater sectoral diversification and a more complete representation of the German stock market,” explained Stephan Flaegel, product manager at Qontigo, a company in charge of building the Frankfurt Stock Exchange.

“In recent years, we have received many suggestions to increase the number of components of the Dax. This is a proposal that we presented during the market consultation and the reactions have been clearly in favor of enlargement, in all categories of stakeholders,” he added.