CoachA structural break is a change, at some date, in the parameters of the process generating a series (here, the mean of a predictor’s IC). The CUSUM test of Brown, Durbin and Evans (1975) cumulates the standardised recursive residuals (each observation minus the mean of those before it, rescaled) and rejects constancy when the path leaves a pair of lines that widen linearly with time, with at 5% for residuals.
firm.synthmkt, with the post-earnings drift intact and with it removed from the start of year 7 (day 1 512). The sup-F test finds the break (p-value 0.013); the CUSUM does not; in this market a 70% cut is found by neither.