What trading strategy was widely blamed for worsening the 1987 Black Monday crash?

Portfolio insurance was widely blamed for worsening the 1987 Black Monday crash.

Portfolio insurance was a strategy designed to limit losses by selling stock-index futures as markets declined. In theory, the futures sales would offset falling stock holdings. When many investors used similar rules, however, a sharp fall could trigger further automatic selling, adding pressure to an already weakening market.

Researchers and regulators did not identify one single cause of Black Monday. Portfolio insurance, index arbitrage, market structure, investor fear, and international contagion were all examined. The crash led to reforms including circuit breakers, which can temporarily halt trading after unusually large market moves. Portfolio insurance did not cause every part of the decline, but it became a prominent example of how similar automated strategies can reinforce a sell-off.