Which financial strategy was widely blamed for intensifying the 1987 stock market crash?

Portfolio insurance was widely blamed for intensifying the 1987 stock market crash.

Portfolio insurance was a computerized trading strategy designed to limit losses in an equity portfolio. As prices fell, the strategy automatically sold stock-index futures, creating additional downward pressure in a falling market. The approach was especially important because many institutions used similar rules at the same time.

The crash became known as Black Monday after major markets plunged on October 19, 1987. The Dow Jones Industrial Average fell 22.6 percent in one session, its largest one-day percentage decline. Portfolio insurance did not by itself explain every feature of the crash; market structure, investor fear, and international trading also mattered.

A common mix-up is treating portfolio insurance as ordinary insurance purchased from a company. It was instead a rules-based investment technique. After the crash, regulators and exchanges introduced measures such as trading halts and circuit breakers.