Résumé

We examine how financial sophistication influences investment outcomes for complex financial products. Using regulatory microdata from Brazil’s structured products market, we analyze how returns vary with investor sophistication and product complexity. We introduce a novel measure of financial sophistication that reflects prior trading experience in other securities markets. Investors with established trading experience systematically outperform inexperienced counterparts when trading complex products, exhibiting both persistent skill and greater learning capabilities. This experience-based measure is more predictive than conventional proxies such as wealth, age, and education. Our findings suggest that complexity can effectively obscure risk from unsophisticated investors, enabling strategic rent extraction through product design. These results question the efficacy of current “qualified investor” standards based on wealth thresholds, suggesting that direct measures of financial market experience provide more effective criteria for accessing complex financial instruments in increasingly sophisticated retail markets.

Biographie

Alan Genaro is an Associate Professor of Finance at the Getúlio Vargas Foundation (EAESP/FGV), Brazil, a position he has held since May 2018. He earned his Ph.D. in Statistics from the University of São Paulo (Institute of Mathematics and Statistics – USP) in 2011 and has held visiting scholar positions at Harvard Business School (2024–2025), the Einaudi Institute for Economics and Finance in Rome (2024), and the Courant Institute of Mathematical Sciences at New York University (2012). His research has been published in leading academic journals, including the Journal of Financial Economics, Journal of Banking and Finance, Journal of International Money and Finance, Economics Letters, and Management Science, among others.