Although the Ethiopian government is engaged in a process of modernization and making major financial reforms, there is no solid financial tool that could assist market participants to analyze risk and return in the agricultural commodity market. Similarly, agricultural policy lacks instruments to shield neither farmers against potential losses induced by a reduction in the price of the crops they produce nor consumers against the increase in the cost of living induced by food price inflation. Accordingly, this study aimed to construct a price index for agricultural commodities, estimate the systematic risk (Beta), and examine the best-fit volatility model. Retail price data of agricultural commodities in five categories: cereals, pulses, oilseeds, root crops, and spices from 2010-2020 from three regions and one city administration were collected from the central statistics agency of Ethiopia (CSAA). The Laspeyres average production quantity weighting index approach was used to construct the index. The systematic risk, or beta, of a commodity was estimated through a market model, and the GARCH family models were used to estimate the volatility of the commodities. The findings show that prices of agricultural commodities revealed an ever increasing trend in all the three regional states and the Addis Ababa city administration despite the fact that there were variations across the areas. The mean monthly returns for each crop were positive while those of the root crops were the highest as compared with the other categories, followed by red pepper. Similarly, commodities having higher returns have higher standard deviations, which imply they are more volatile. It was also found that the systematic risk of agricultural commodities has a significant positive relationship with the return of specific commodities. Moreover, out of the GARCH specifications, the EGARCH was a better fit model for the volatility of “Teff” ," "maize," "Niger," "onion," "potato," and "red pepper," and the TGARCH model fits the data best for "sorghum," "barley," and "beans". In Ethiopia, prices of agricultural commodities have been increasing. Once the price of a crop has increased, its probability of falling below its previous average is very low. Moreover, the return on agricultural commodities is significantly influenced by the overall market return, and there is volatility clustering. "Bad" news has a greater impact on volatility than "good" news of the same magnitude.