Which investment strategy was widely blamed for intensifying selling during the 1987 stock-market crash?

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

Portfolio insurance was a rules-based strategy intended to limit losses by selling stock-index futures as the market declined. The approach could appear protective in ordinary conditions, but widespread use created the risk that many investors would issue similar sell orders at the same time.

During Black Monday, falling prices led portfolio-insurance models to recommend additional selling. That selling placed further pressure on prices, creating a feedback loop. Index arbitrage and other trading activity also affected market conditions, so portfolio insurance was not the only factor in the crash.

Later investigations emphasized the interaction between market structure, derivatives, automated or program trading, and limited liquidity. The episode helped motivate reforms including coordinated trading halts, commonly known as circuit breakers. Portfolio insurance should not be confused with an ordinary put option, although both can be used to manage downside risk.