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1988•NBER Macroeconomics AnnualOpen access

Portfolio Insurance and Other Investor Fashions as Factors in the 1987 Stock Market Crash

Robert J. Shiller

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Abstract

Robert Shiller asserts that investors already had a "crash mentality" before October 19, associated with views about borrowing, government debt, and the perception that portfolio insurance was affecting markets. The proximate cause of the crash, he believes, was a response to price declines: the assumption by investors that the crash had arrived. In Shiller's opinion, the crash was as much a sociological or psychological phenomenon as an economic one.

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Robert Shiller asserts that investors already had a "crash mentality" before October 19, associated with views about borrowing, government debt, and the perception that portfolio insurance was affecting markets. The proximate cause of the crash, he believes, was a response to price declines: the assumption by investors that the crash had arrived. In Shiller's opinion, the crash was as much a sociological or psychological phenomenon as an economic one.

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Available abstract

Robert Shiller asserts that investors already had a "crash mentality" before October 19, associated with views about borrowing, government debt, and the perception that portfolio insurance was affecting markets. The proximate cause of the crash, he believes, was a response to price declines: the assumption by investors that the crash had arrived. In Shiller's opinion, the crash was as much a sociological or psychological phenomenon as an economic one.

Key concepts: Crash, Stock market crash, Portfolio insurance, Portfolio, Proximate and ultimate causation, Economics, Stock price, Phenomenon

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