Funnel in the Residuals

You fit household spend on income with OLS. The residuals-versus-fitted plot is a funnel: residuals sit within about ±2\pm 2 near fitted values of 20 and within about ±40\pm 40 near fitted values of 500. A Breusch-Pagan test rejects its null that the residual variance does not depend on the regressors.

Select every statement that is true of this fit. (Select all that apply)

A

A funnel means the relationship is non-linear, so adding a quadratic term is the fix.

B

The coefficients are biased toward the high-variance observations and the fit has to be discarded.

C

Refitting with heteroscedasticity-robust standard errors (HC0 to HC3) leaves the coefficients unchanged and repairs the inference.

D

The coefficient estimates are still unbiased: the assumption that broke describes the error variance, not the mean function.

E

The reported standard errors, t-statistics, p-values and confidence intervals are no longer trustworthy.

F

R2R^2 is undefined whenever the residual variance is not constant.