The second part of our paper goes on to investigate whether earnings opacity affects equity markets. We first examine the effect of our measures of earnings opacity on the return shareholders demand for holding equity (cost of equity). We measure the effect on the cost of equity employing two distinct approaches used in a companion paper (Bhattacharya and Daouk 2002). We discuss the details of these approaches, and their merits and demerits, in the next section of the paper.