Which 1987 market mechanism was widely blamed for amplifying selling during Black Monday?

Portfolio insurance was the market mechanism widely blamed for amplifying selling during Black Monday in 1987.

Portfolio insurance was a strategy intended to limit losses by selling stock-index futures as markets declined. In a rapidly falling market, the strategy could generate additional sell orders, potentially reinforcing the downward movement it was meant to protect against.

On 19 October 1987, a combination of investor anxiety, international market weakness, and automated or rule-based selling overwhelmed available liquidity. The Dow Jones Industrial Average lost 22.6%, the largest one-day percentage decline in its history.

Economists and regulators continue to debate how much portfolio insurance contributed compared with other factors. It was an amplifier, not a complete explanation for every cause of the crash. The episode helped shape later circuit-breaker rules.