Convertible bond calls typically cause significant reactions in equity prices. The empirical research largely finds negative and positive announcement effects for the in-the-money and the out-of-the-money calls respectively. However, this research has difficulty distinguishing between the two main theoretical explanations: the signaling effect and the price pressure effect. In this paper, we differentiate between these two effects by using a unique data set of the in- and the out-of-the-money calls in the United States during the period of 1993 to 2007. We find that the announcement effect for the in-the-money call is predominantly explained by the subsequent order imbalances; and the stock market's reaction is spread over an entire trading day, which is consistent with the price pressure effect. In contrast, the announcement effect for the out-of-the-money call is driven by the size of the called convertible bond; and the stock market's reaction is almost immediate, which is consistent with the signaling effect.