Photochromism allows for reversible light-induced conversion of a molecular species into a different form with significantly altered optical properties. One promising compound that excels with high fatigue resistance and shows its photochromic functionality both in solution and in molecular solid films is the diarylethene derivative CMTE. Here we present a comprehensive study of its photophysical properties with density-functional theory based methods and benchmark the results against higher-level quantum-chemical approaches and experiments. In addition to static properties such as optical absorption, perceived color, and refractive index, we also investigate reaction dynamics based on non-adiabatic ab initio molecular dynamics. This gives detailed insight into the molecules' ultrafast reaction dynamics and enables us to extract reaction time scales and quantum yields for the observed electrocyclic reaction following photoexcitation.