Structural Change

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DEFINITION

An economic condition that occurs when an industry or market changes how it functions or operates. A structural change will shift the parameters of an entity, which can be represented by significant changes in time series data.

INVESTOPEDIA EXPLAINS

A structural change can alter past trends or theories regarding stock returns. For example, let's say the futures market on oil is usually in contango, which means that oil today is more valued than oil in the future. If political instability and fears of scarce reserves arise, the oil market may undergo a structural change. Demand for future oil may increase, as people would fear lower supply levels for that period. Consequently, the market may shift to a backwards market, where the oil today is less valuable than future oil.


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