Structural break
Structural break is a point at which the relationship between variables in a regression model changes permanently. A single set of coefficients then no longer describes both sub-periods reliably.
Also known asparameter stability
See it move
Loading infographic...
A scatter chart plots an outcome variable on the vertical axis against time period on the horizontal axis, with two OLS fitted lines of visibly different slopes separated by a break point. Before the structural break one slope characterises the relationship; after the break a distinct slope takes over. Fitting a single regression line across both regimes produces slope estimates distorted for each period individually, because the pooled line reflects neither regime accurately.
Where it fits
SubjectData Analysis & StatisticsAdvancedTopicRegression Diagnostics & ProblemsAdvanced