The correct answer is: D. size of company
The Fama French Three-Factor model is a model that describes the cross-section of stock returns. It states that the returns of a stock can be explained by three factors: market risk, size risk, and value risk.
The market risk premium is the additional return that investors demand for holding risky assets over risk-free assets. The size risk premium is the additional return that investors demand for holding small-cap stocks over large-cap stocks. The value risk premium is the additional return that investors demand for holding stocks with low price-to-book ratios over stocks with high price-to-book ratios.
The market value of company equity is used to calculate the size factor in the Fama French Three-Factor model. The size factor is a measure of the size of a company, and it is calculated by dividing the market value of a company’s equity by the number of shares outstanding.
The other options are incorrect because they do not measure the size of a company. Option A, size of portfolio, is a measure of the size of a portfolio of stocks. Option B, size of industry, is a measure of the size of an industry. Option C, size of market, is a measure of the size of the overall stock market.