The retail market for structured financial products has experienced substantial growth, accumulating trillions of dollars in assets worldwide since the 1990s. The concerns raised by regulatory bodies highlight the need for better investor protection in these markets that promote complex financial products. Using unique micro-data from the Brazilian Securities and Exchange Commission, this article investigates the relationship between product complexity, investor sophistication, and investor returns. We show that, on average, complex products yield lower returns. Sophisticated investors with greater experience in financial markets exhibit greater returns than unsophisticated investors, both on average and when investing in more complex products. Notably, independent brokers play a role in certifying complex products by mitigating rent-seeking behavior associated with lower-quality issuers. The study contributes to the ongoing discourse on regulating complex financial products
Complete tool for submission, evaluation and publication of proceedings for scientific events.
