2 year old started pulling hair-worried mom

Our 2 year old daughter began to pull her hair out when she started daycare 2 months ago. She now has a large bald spot on the side of her head. I don't know what to do.
Has anyone tried cutting the hair? Does it work? I want to cry when I think about cutting her hair!
Sometimes I wonder if I just leave work, and stay home with her, will she stop?
I'm not so sure where to start....
Thanks!