Terence Mitchell and Leigh Thompson’s 1994 article outlines a theory of a three-stage evaluation of events that leads to this phenomenon.
The first stage of this theory is rosy projection, or anticipating events more positively than events will be. The second is dampening, or minimizing the pleasure of current experiences. The final stage is rosy retrospection, or remembering experiences more favorably than they were experienced.
One possible cause of this memory bias is our tendency to not take note of moments occurring in the middle of a story, the less dramatic or exciting parts, and thus less memorable ones. Another theory is that people steer their recollections of events towards their pre-constructed narratives. For example, the perception of “Spring Break” as a positively intense event masks all the “break’s relatively neutral moments”, resulting in an overestimation of the experience.
Rosy retrospection differs from nostalgia in that nostalgia describes a general longing for the past, while rosy retrospection is a cognitive bias in which we view the past inaccurately, through ‘rose-colored glasses’.