January 2020, Paper: "We show that reaching for yield a tendency to take more risk when the real interest rate declines while the risk premium remains constant results from imposing a sustainable spending constraint on an otherwise standard infinitely lived investor with power utility. This is true for two alternative versions of the constraint which make wealth and consumption follow martingales in levels or in logs, respectively. Reaching for yield intensifies when the interest rate is initially low, helping to explain the salience of the topic in the current low-rate environment. The sustainable spending constraint also affects the response of risk taking to a change in the risk premium, which can even be negative when the riskless interest rate is sufficiently low."
Non-HKS Author Website - John Y. Campbell