Which investment strategy was widely blamed for amplifying selling during the 1987 Black Monday crash?

Portfolio insurance was the investment strategy widely blamed for amplifying selling during the 1987 Black Monday crash.

Portfolio insurance used computer-driven rules to reduce exposure as markets declined. The strategy commonly involved selling stock-index futures when prices fell, with the aim of limiting losses in a falling market. Many institutions adopted versions of it before October 1987.

During the crash, simultaneous signals produced heavy selling in futures markets. Arbitrage links between futures and stocks then transmitted pressure between the two markets. This helped create a feedback loop: falling prices triggered more sales, and those sales contributed to further falls.

Portfolio insurance was not the only cause. Rapidly rising valuations, market uncertainty, international weakness, and concerns about monetary and trade conditions also mattered. The episode is sometimes described as entirely caused by computers, but the historical evidence points to a combination of market structure, investor behavior, and economic concerns.