Rumors during the 1987 crash exaggerated portfolio insurance trade size three to fourfold

Evidence

LOR heard rumors that “suggested portfolio insurance trading was going to be three or four times larger than in fact it was” (Norris 1988, p. 28) they might have felt less afraid. — Donald MacKenzie, An Engine, Not a Camera, 874

Categorization

• XREF: connects to: Portfolio insurance trades could double NYSE volume on a 3 percent drop — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 811; Observed portfolio-hedging sales would have caused under one percent of the 1987 crash. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 870; Portfolio insurance sells more stock as price falls, creating mechanical downward supply. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 867 (+1 more)

Broader Connections

• Portfolio insurance collapsed after 1987 partly because it became socially tainted #expands (0.75) — Donald MacKenzie, An Engine, Not a Camera, 889