Which U.S. market mechanism was widely blamed for amplifying selling during the 1987 crash?

Portfolio insurance was widely blamed for amplifying selling during the 1987 crash.

Portfolio insurance was a computer-assisted strategy intended to limit losses by selling stock-index futures as markets declined. The approach could provide protection in a gradual downturn, but many investors following similar rules attempted to sell at the same time during a rapid fall.

This created a feedback loop: falling prices generated more sell orders, and those orders pushed prices lower. Index arbitrage, which linked futures and cash markets, also contributed to pressure and helped transmit price movements between them.

The mechanism was not the only proposed cause. High valuations, interest-rate changes, dollar concerns, and international trade disputes were also discussed. “Portfolio insurance” therefore describes an important amplifier rather than a universally accepted single cause of Black Monday. The crash prompted reforms including trading halts and coordinated emergency procedures.