Studies have found that people tend to view themselves as smarter, funnier, more talented, and more successful than they really are, at least in some areas of life. These positive illusions help people maintain self-esteem, feel good, and keep discomfort at bay, at least for a while.
Happiness levels change in the immediate aftermath of positive and negative events. However, these changes are temporary. People's moods tend to level off and return to baseline levels after a short period of time.