I develop a two market agent-based model to study how global portfolio managers affect global financial crises and stability. The Markowitz model is extended by incorporating several insights from behavioral finance. Simulation results of an agent-based version of the Markowitz model reveal that global financial crises do not occur when global managers are added to the model. However, when risk is determined based on investors’ historical losses and exponential averaging, slight global manager losses can trigger a widening of both markets’ risk premium, accelerating the decline in asset prices worldwide. Statistical analysis reveals that global managers are a stabilizing force in smaller numbers; however, they become destabilizing in larger numbers. The ability to reduce risk by diversifying across markets results in excessive risk taking. If global managers exist in larger numbers, systematic over leverage may result such that a deleveraging process can lead to the spreading of financial crises. I also test the endogenous risk premium used in the above theoretical data using mutual fund data. I find the index can detect financial crises and therefore has direct implications for measuring the magnitude and duration of the current financial crisis.