Are newly self-employed overly optimistic about their future well-being?

• We study if newly self-employed people accurately predict their future well-being. use individual panel data to compare expected and the realized life satisfaction. Newly are too optimistic about The overoptimism also holds for successful entrepreneurs who remain in business. discuss reasons misprediction such as underestimating heavy workload. formation of expectations is considered a fundamental aspect decision process when reason entering self-employment. evaluate accuracy individuals’ predictions overall Based on Germany, we find that they, average, overly right after status change with actual satisfaction five years later. This finding robust controlling any time invariant personality traits like optimism. And it those individuals successfully business at least years. A possible biased prediction might be they underestimate workload reflected higher working hours than desired, well decline leisure change.