Depressive Realism is the interesting fact or observation that people who suffer from mild to moderate depression have a more accurate view of reality than people who do not suffer from depression.
It is believed that people who do not suffer from depression or people who are viewed as constantly "happy" or "optimistic", in fact envelope themselves in illusions. In a sense, these people live in "la-la land". When tested, such individuals routinely over-estimate their attractiveness, their importance, and their future potential.
People who suffer from mild to moderate depression routinely exhibit a more accurate view of reality. Such people when tested come closer to ranking their own level of attractiveness, self importance, or future potential than people who are not depressed. It is believed the reason why depressed people have a more accurate view of reality is due to such people's view of a 'gray' world, compared to the 'black and white' world view of the non-depressed.
The only exclusion would be the severely depressed. People who suffer from severe depression envelope themselves in similar illusions as the non-depressed, save that their illusions are far darker and reflect a worldview closer to "black" rather than the "gray" of mild to moderately depressed individuals.
Probing the puzzling workings of 'depressive realism'