There is no single reason per se. Mainly, it's the type of companies listed on the stock exchanges in Paris and Frankfurt and their valuations. The German index is heavily skewed towards Industrials while the French one towards Consumer Discretionary (plus they have one of the Big 5 super-majors in the Oil sector while the Germans do not have any oil play).

Just take for example the top company in the CAC 40 which is LVMH $LVMHF. It has a market cap of $ 426 bn which is the combined market caps of the first three companies in the DAX 30 - Linde $LIN, SAP $SAPGF and Siemens $SMAWF .

Also, you have to take in mind that the German GDP is almost 1.5x that of France.

Check below the list of companies in the CAC 40 and the DAX 30:

This is a graph where you can see the nominal GDP for both countries:

Finally, this is the performance of the CAC 40 and the DAX 30 for the past 5 years. The French index has outperfromed the German just about 2x:

@kostofff excellent comments Todor. Thanks for the detailed response. Makes sense!

@stockopine Sure 🙂

@prinzmyschkin Seems like countries such as Switzerland, Canada, Saudi Arabia, Taiwan, Sweden, Singapore etc. have been excluded from the analysis by GS.

In the example with Switzerland:

Currently, the the Market Cap of the Swiss Exchange is c. $ 2.2 T while the nominal GDP is at $ 807 bn. This gives us a ratio of c. 272% as a Market Cap % of GDP. This is by miles the widest margin compared to the countries included in the table.

@buyingyourtime Thanks.