What affect does wrong level gear have?

[syntaxlies]

Its a hidden stat reduction, amount depends how far off the optimal rank you are, i dont think anyone knows exact amounts yet, but you should try to be +/- 5 ranks i beleave. Also the gear gets damaged alot quicker if you are off the optimal rank again +/- 5 ranks should be enough

its not hidden,
for example
first equip the right sword check then check your stats,
then equip a rank in-appropriate sword and check the stats.
The rank appropriate equipment will always give you higher stats. And rank inappropriate equipment degrades faster.