I am doing spot price forecasting for a market, and so far, the naive forecasting model, which forecasts with the last observed prices, is the best forecasting model. I know that it might be because of my poor forecasting skills; however, how can this situation be explained if it is not the case?
So far, I have come up with two potential explanations:
1-The market is efficient. Therefore, forward contract prices are unbiased estimators of future spot prices. Since forward contract prices are distributed symmetrically around the spot prices under rational expectations, we can say that the last observed spot price is a good predictor for future spot prices.
2-Spot price process behaves like a Martingale. In Martingale, expected future spot prices are equal to the last observed spot price.
I am new to these topics; therefore, I am confused about differentiating the efficient market hypothesis and martingale process. Are these explanations meaningful? Is it possible that both explanations are correct, or only one of them can be right?