This study examines the association of accounting conservatism, growth and macroeconomic
risk factors and valuation error of residual income model in Indonesian Stock
Exchange. We use beta, book to market ratio, and size as proxies for macro-economic risk.
Using sample of 186 companies taken from LQ-45 for the year of 2001 – 2005, we find that
accounting conservatism and growth, have no significant influence toward residual income
model valuation error. B/M has significant influence toward valuation error and has
consistent sign as predicted by theory. Beta and Size has no significant influence toward
valuation error. Overall, macro-economic risk factors can explain the valuation error better
than accounting-based factors.Future research is expected to find accounting variables that
can represent macro-economic risk and test their ability to explain valuation error. Also, future research need to confirm the relevance of accounting conservatism in stock valuation after implementation of IFRS in Indonesia.